2023-07-17 06:51:13 ET
Summary
- This article highlights current and future ETF/ETN breakouts for Week 29 using the MDA momentum cycle model.
- Following the positive Momentum Gauge signal on June 1st, leading funds include NAIL +67.1%, FNGU +27.5%, TNA +26.5%, BNKU +20.5%, SPXL +19.5%, FAS +19.4%.
- Healthcare remains the only sector negative for the past month, and the beat by UnitedHealth Group may lead to a breakout in Healthcare fund CURE.
- Mega cap technology has had an incredible run leaving all other sectors and indices in the dust with TECL up +151.9% YTD and mega cap FNGU +377.7% YTD.
- The 3x homebuilder fund NAIL had 27% gains this past week and is up +176% YTD as rising mortgage rates appear to be greatly benefiting new construction.
Introduction
This article highlights current and future ETF/ETN breakouts for Week 29 using the MDA momentum cycle model. Much more detail on how to maximize market returns using the Momentum Gauges can be found in many reference articles:
- Maximizing Market Returns With The Automated Momentum Gauges
- Momentum Mojo: Alternating Segment Breakouts Favor Oversold Value And Small Caps
Momentum Gauges Dashboard for Week 29
The Momentum Gauges all declined Friday in the first decline after a week of gains to the highest levels since June 2021. In prior peak levels the market declined in the following month, but the momentum gauge signal continues positive from June 1st. Historically, July is the 2nd best month of the year on average for the S&P 500 since 1927.
- Guide: Maximizing Market Returns With The Automated Momentum Gauges
- Strategies: How to Trade for Maximum Returns
Daily Market Momentum Gauges
The daily Momentum Gauges remain positive from June 1st with more than 3 days of increasing negative momentum values in an early negative signal from max low levels.
The S&P 500 ETF ( SPY ) road map from the June 1st positive signal:
RSI proxy indicator above is showing another potential pullback for next week from short term overbought levels. We are starting a new early negative test signal on Monday and the last time we got an early negative signal was back on June 16th.
Breakout ETF Portfolios
Highlighting a few of the 11 Sector Gauges where breakout conditions may continue strong for next week. For more instruction on how to use the Momentum Gauge charts check out my latest trading video .
Daily Technology Momentum Gauges below show the condition of the technology sector as the highest weighted and largest sector on the major market indices. Technology stocks led by mega tech giants Apple, Inc. ( AAPL ) and Microsoft ( MSFT ) have had an incredible run leaving all other sectors and indices in the dust so far this year. The 3x Direxion Technology bull fund ( TECL ) shown on the chart in yellow is up +151.9% YTD with only 4 short negative signals this year further enhancing returns. The main thing I am watching here is to see when the crowding into tech may come to an end. Positive momentum levels have not reached the highs of the January peak, but are pulling back on Friday from the highs of the June peak.
Healthcare remains the only sector negative for the past month and strong earnings beat by UnitedHealth Group ( UNH ) may lead to more positive breakout conditions in the Healthcare sector and 3x Healthcare fund ( CURE ) for next week.
If we see any sector rotation in the coming week, I expect it may benefit Healthcare the most along with Energy that have been lagging the markets.
The Momentum Gauge ETF Bull/Bear model signal changes are shown below. These are member selected test funds and returns can be improved by following individual sector gauges (not just the broad gauge signal shown below) and gauges specific to each of the different types of funds. Be sure to read the Momentum Gauge guide for best results.
Returns shown here are for signals lasting longer than 3 days. Gold and Biotech funds have been lagging the most since the June 1st positive signal, but have seen strong improvement recently. The run in 3x Homebuilder bull fund ( NAIL ) up +176.7% has been incredible as mortgage rates drive huge demand for new construction. The existing housing inventory for sale has dropped off sharply as homeowners reportedly do not want to move and lose their very low interest rate loans from prior years.
The US Dollar index fund ( UUP ) is a key factor in Basic Materials, Emerging Markets, China, and Commodity funds that trade nearly inverse to large dollar swings this year. We have seen a strong rally from June as the dollar has declined to prior lows into July. If the dollar rebounds from support levels back in April/May then we are in for market declines next week in many key sectors. This will be a very key input to watch in the markets next week.
Direxion Daily FTSE China Bear 3X Shares ( YANG ) has a strong correlation to the US Dollar with peaks in March and June as it retests the lows of May. This could mark a topping signal for the China bull fund ( YINN ) +11.9% for the week and a good re-entry point for YANG.
Direxion Daily 20+ Year Treasury Bull 3X Shares ( TMF ) continues to lag into 2023 while the Fed Quantitative Tightening program continues at record levels from June of last year. The Fed is the largest holder of treasuries peaking at over 25% of all treasuries last year. I expect long term treasuries to do well when the Fed stops selling and rolling off treasuries from their balance sheet at $97 billion per month at the fastest rate in US history since last year.
Conclusion
All the sector gauges continue highly positive, but weakening from prior peak levels that often marks an early top in the markets. It remains to be seen if the US Dollar will continue to decline in such a favorable direction for markets next week or rebound from May support levels after this sharp decline. The drop in the dollar contributed to one of the most positive weeks in the market this year.
As long as the Tech mega caps continue to push higher with strong net inflows the corporate large cap indices S&P 500 and Nasdaq will gain on extreme overweighting on Technology.
All the very best to you, stay safe and healthy and have a great week of trading.
JD Henning, PhD, MBA, CFE, CAMS
For further details see:
July Breakout ETF/ETNs Week 29 - 2023: Strongest Momentum Gainers For Next Week