We are in a "wait a minute" Trending Stock Market

Feb 09, 2025

While the stock market participants seem to be feeling optimistic about the prospects this year, there is some trepidation about what the inflation numbers are going to look like going forward. That is keeping the prices subdued a bit and the indecision from traders can be seen in the price action.

Anyway, that is about the general markets. My attempt in these notes is to find opportunities where I can still find value. Today I will cover the following:

Major Markets Trending
Underlying strength in the major markets
Major Markets daily charts
SPX sectors trending
MAGS vs. FNGS
Gold vs. Bitcoin
SMH vs. IGV vs. ARKK

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Major Markets Trending

At a summary level, this is how I see it.

The SPY, QQQ and DIA still look OK with QQQ the best among them. But I would not touch the RSP, IWM or MDY at this time. I do not want to keep how I get that summary color chart a mystery. I use the daily charts for short-term, the weekly charts for medium-term and the monthly charts for Long-term. Here is how they look like:

Trending based on daily charts:

The MDY has deteriorated the most in the short-term. Note that it was the best earlier in January.

Trending based on weekly charts:

Trending based on monthly (month-to-date) charts:

Now that summary chart may make more sense. Overall, the trending does not give me a warm and fuzzy feeling to go long. But it does not tell me that markets are in dire straits either. Markets are lackluster and somewhat directionless.

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Underlying strength in the major markets.

The directionless or inconclusive nature and trending in the markets is also demonstrated in the underlying strength of the major markets that I track this for: SPY, QQQ and IWM.

I see how many of the underlying stock prices are above their 20-day SMA. This is how the picture looks like as of Friday close.

This trend is over 11 weeks, and we can see that we have a up and down situation. In a nicely bullish trending market, we should see sustained numbers in the 60-80% range. But now we can see that the underlying strength is somewhat swinging wildly.

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Major Markets daily charts

It helps to see the charts and try to read what we can glean from them.

Starting with SPY

I still see the bull flag pattern. I accept that it is taking a long time for the bullish price action to materialize out of this flag. Maybe the upcoming week that will happen or tell us definitely it is not happening. The price is above the 20-day and the 50-day SMA which is good.

Next up QQQ

Very similar to the SPY but I see more of a wedge pattern in the QQQ. The cone is becoming very narrow for comfort and price should be imminently breaking out. The question is in which direction - above or below. Until the Friday price action I would have said breakout to the upside looks more probable. But now I do not know anymore. Price did remain above the 20-day and 50-day SMA.

Finally, IWM

The IWM is not in good shape. Price has had a hard time getting and staying above the 50-day SMA (purple) and also staying above that wedge pattern. We can see that last week, price stayed above the wedge couple of days but then dipped back on Friday. Right now, price is hoping to stay above that 20-day SMA (red).

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SPX Sectors Trending

This is how the trending heat map looks like right now.

Not surprised that XLF is trending perfectly bullish. But I am surprised that XLRE is also perfectly bullish now. XLE has completely gone to the dogs in correlation with the price of oil. XLK looks better again. So does XLU. But XLV has stalled a bit. And XLC is buoyed by META and NFLX. XLY was suffering already because of TSLA but then AMZN also disappeared in its price action post earnings.

Best plays remain XLF and XLC. The ones to avoid remain XLE, XLB and now also XLY.

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MAGS vs. FNGS

Both of these usually move in tandem. But MAGS is suffering a bit because of TSLA dragging it down. And FNGS is staying a little above water because of CRWD and NFLX.

There are only subtle differences between the 2 instruments in their composition. And these are important to keep in mind.

This is MAGS composition

This is FNGS composition

So, we can see that 6 stocks are common between MAGS and FNGS. MAGS has TSLA that FNGS does not have. FNGS has CRWD, AVGO, NOW and NFLX that MAGS does not have.

This is how MAGS daily chart looks like.

We can see price is below both the 20-day and the 50-day SMA. Price has also slipped under the wedge. So, not looking good.

This is the FNGS daily chart.

This chart looks better with price above the 20-day and the 50-day SMA. I also like that smiley face bottoming formation.

We can tell from the trending heat map of the combined 11 stocks within the MAGS and FNGS to see why FNGS looks better right now.

CRWD and NFLX which are only in FNGS are perfectly bullish. Whereas TSLA which is only in MAGS is trending poor.

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Gold vs. Bitcoin

Gold has been on a run and making all-time highs while Bitcoin seems to have stalled. As I write this Bitcoin is trading at around 96k. The price range has been 92k to 108k.

First here is GLD daily chart which is the Gold ETF.

Price has been steadily rising since middle of December 2024 and continues to look strong. I am long in the short-term.

And here is the IBIT daily chart which is the most popular Bitcoin spot ETF

I have a wedge pattern formation and price has fallen under than as of Friday. At the same time, there also is a bull flag pattern which can drive price much higher. So, even though the price is below the 20-day and the 50-day SMA, I still am going to hold IBIT for the long-term. I have realized that standard chart analysis does not do Bitcoin much justice,

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SMH vs. IGV vs. ARKK

It does seem that the AI trade has moved away from infrastructure (including the semiconductors - SMH) to AI software (IGV). And ARKK is again looking good as innovation seems to be thriving.

First the SMH daily chart