Week 31 Stock Market ROI

Every week I track the stock markets return on investment so that I can combine that with the trending report and make decisions on trades.

Major Markets

The major US markets eked out a gain this week except for the Dow Jones that was slightly down. That is 3 weeks in a row that the markets have had positive returns. The markets (S&P 500 along-with others) turned short-term bullish per my system on July 7th. See below:

That week the markets closed up (Week 27). But the following week was weak, and the markets had losses (Week 28). However, with gains over 3 consecutive weeks, the markets have demonstrated strength and confirmed the short-term bullish reversal.

Yes, there is a good probability that the upcoming week the market has losses. I would expect some profit taking after 3 weeks of gains. But the bullish trend is established and there is a good probability that the markets try to become perfectly bullish. Pere my system, the markets will be perfectly bullish when the short-term trend is bullish and the 50-day moving average has also crossed over the 200-day moving average which makes it long-term bullish as well.

Major Sectors

We did have a little more weakness in the markets in Week 31 than what we saw in Week 30. This is why I review not just the major markets but the underlying sectors well. It tells a story.

Energy XLE gave up a lot of its gains from prior week. The Metals & Mining XME was also sluggish but was able to stay positive. Surprisingly, Financials was down. One would imagine with interest rates being hiked by the Fed; the Financials would do well.

The big story of course is Biotech XBI. After a +13% gain in Week 29, it has again delivered a gain of +13% this week. Interestingly it did take a breather in Week 30. So, does that mean it will do the same next week? That’s possible. There will be folks who will cash in on their gains. Not sure if that will be enough to make it go down though.

As we can see in the above 3-month chart, there are 2 things happening with the XBI. The price is fast closing in on its 200-day moving average. If the momentum continues, the price will cross the 200-day moving average. At the same time the RSI is at 70 which is high. So, it may stall the next week before continuing with its momentum. If I was going to trade Biotech now, I would wait for a dip and then buy into short-term call options.

Another sector that has done well this week is Retail XRT. retail is hard to figure out and I usually stay away from trading the XRT. The back-to-school is coming up so one would think this is a good time for retail. At the same time, I am reading that the retail stores have stocked up on goods that are not the goods that people are buying given the inflation. That could mean stocks piling up and desperate price cutting. Too complicated for me to play with these dynamics.

Interestingly, the Transports XTN are doing very well as we can see from the above weekly ROI table. It is up +16.5% over the last trailing month. Also, the Industrials XLI is doing well up +10.1% over the last trailing month. These are of course more defensive sectors and perhaps investors are seeking protection in these sectors.

I am invested in Technology XLK and Semiconductors XSD sectors. Both are trending short-term bullish and doing quite well. The XLK is up +13% over the last trailing month. The XSD is up +26% over the last trailing month. I am long TQQQ, SOXL and FNGU which are the leveraged instruments within the Technology sector.

Countries

I started tracking the ROI for Countries from this week. Note that I have been tracking the trending for a while now. Except for Hong Kong EWH and China FXI, all the Countries are trending short-term bullish.

No big moves in the Countries ROI with Singapore doing the best returning +3.7% for the week. Australia, Canada, Hong Kong, Japan and China were negative.

Alternate Sectors

Also started tracking ROI for the Alternate Sectors from this week. The first thing that jumped out at me are the returns on the ARK funds. So, disruptive innovation was hot this week for sure.

Couple of weeks back, I had done an assessment of traditional finance using XLF and FinTech using FINX and ARKF. It was clear that the traditional finance was handily beating the FinTech space in ROI. However, this week is quite the opposite. The XLF was flat whereas FINX was up +5.7% and ARKF up a whopping +13.5%.

Big Tech

Big Tech was definitely big this week. Even the 2 Chinese stocks in this list - Alibaba and Baidu - were positive. Surprisingly Tesla was negative. Unsurprisingly Intel was negative.

Meta gained back most of its losses from prior week. Amazon and Nvidia continued to deliver good gains. Apple remained steady. In fact, Apple’s 1-month chart is just about perfect. Take a look:

See how the price has never dipped below its 10-day moving average. Plus, the 10-day and 20-day moving averages are almost moving in sync. It has been just about perfect for both investors and traders.

Leveraged Tech

I also started tracking the leveraged Technology instruments this week since I trade them so often. Yes, LABU is up +44% in 1 week. Do remember though, it is one of the most volatile of the leveraged instruments. I am long TQQQ, FNGU and SOXL at this time.