Market Relative Strength

17 Jul 2021

Hey guys, -- thought I would share some of the stuff I look at on a weekly basis to understand where the market is at.

The Main Chart is Sectors Super Strength

• This Chart shows normalized relative percentage sector strength since 24 June
  
• The pink line Shows the S&P500
  
• We can see that Tech and Gold has been doing well since 25 Jun VS other sectors while materials and industrials are lagging
  

Sectors above 20 Moving Average Chart

• Here we can see which sectors are above their moving averages -- red lines means below the moving average, the green line above moving average
  

The CAPS Chart

• Shows the different market caps [Large Caps VS Medium Caps VS Small Caps]
  
• If all CAPS are red, then I won't trade long, and moe up stops. If all CAPS are green, then I'll go heavy on long trades.
  
• We can see that the large caps are pulling the market forward, but small and mid-caps have been pulling it down.
  
• Typically Large caps are slow to respond, and small progressive corrections and led by small caps, then mid-caps, and finally large caps
  
• Small Pullbacks like this are normal, and a sign of a healthy functioning market with steady market participation

Market Expectancy Chart

• TQQQ Tech ticker: from the image below we can see that tech is overextended quite a bit, so it's due for a small correction back to its normally expected trading bands -- white striped bands
  
• With tech being such a big part of the market these days, my focus is not to take new longs, but to take profits, move stops up and look at short trades trading sytems

The Table Sector Performance chart

• Shows how each sector has performed over the last 10 days
  
• I use this to check which sectors are weak, versus which sectors are strong
  
• This shows me which sectors I should avoid, and which sectors I should focus on
  
• If too many sectors are red, then it means that I need to pay attention for a possible market correction
  

When LOOKING at the market fundamentals / market structure / market internals I look at:

• Where is the market now?
  
• Is the market over-etended?
  
• Which sectors are weak VS strong?
  
• Where the NASDAQ and SPY trading within their expected bands? -- I don't use log charts, with expectancy bands, because they don't work on log charts.
  

• Is there anything else that you guys find useful gauging the overall market?