Does the third quarter mean a new start to the year? We will get to that in a few minutes but first a couple housekeeping items.
First, we recommended Salesforce (CRM) in an article that was published on June 13th so we will use the close of that day. The stock closed then at $166.03, It closed Thursday, July 7th at $176.64 up $10.61 which is 6.39% while in the same period the S&P 500 is up 4.08% and the Technology Select Sector SPDR ETF (XLK) is up 6.01% so we are tracking the sector return and ahead of the S&P 500.
Next up we are updating our Bias Indicator on the major equity indexes. We also can do this table on any security that trades as long as there is volume attached. Next week we will look at how we use this to track asset allocation across stocks, bonds, currencies, commodities and international as well as sectors.
Since our last update on the 21st of June, all the Daily DMA Channels have turned positive. In addition, ONEQ and IWM have turned to Inside From Below which if they continue to move higher will improve the status to Above.
We have also included Growth vs Value ETFs below the indexes. It is notable that Growth via IVW is looking better than IVE. All year long the story has been able Value beating Growth. Well that looks to be changing five days into the third quarter. It might not be a bad time to trade IVE for IVW. Here is a favorite chart from Erlanger Chart Room (ECR) that enables me to see the outperformance of IWM.
The chart above shows the relative strength of IVW against IVE. When the blue line is heading higher growth is beating value. We also throw in a 20 day simple moving average to track the degree of outperformance so when the blue line is above the red moving average then IVW is beating IVE.
Last, we create a spreader of the relative strength and the moving average and when it is green we have out performance. As you can see, IVW is just starting to outperform IVW. Could this be a game changer signal? Time will tell.
As the week ended, the S&P 500 lost a little ground on Friday, -0.08%, but not enough to counter a four day rally that saw the S&P 500 rise 3.01%. Over the last fourteen weeks, the S&P 500 has now risen three weeks so clearly there is room for more upside.
Last, we note that our indicator the Erlanger Big Barf (EBB) closed above zero which is a good sign of more potential upside. The EBB tracks the relationship of the S&P 500 against the CBOE Volatility Index. It will move higher if the S&P 500 rises and the VIX falls. The EBB will also fall if the S&P 500 falls and the VIX rises. The VIX closed on Friday at 24.64 which is its first close below 25 since June 9. Next up is a test of 20.
The chart above shows the S&P 100, the EBB, a MACD of the EBB and the triple exponential moving average (TRIX) of the EBB. Currently, all are moving higher which is a positive for future upside price action for stocks. We will see how the EBB is doing in our next commentary.
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