Last week’s ContraGauge (CG) readings were: Monday 190.3, Tuesday 194, Wednesday 191.7, Thursday 196.7 and Friday 197.3 degrees.
The CG continues to pull up from the 180 level. The bull trend is clearly underway on the large cap indexes, with the S&P 500 and Dow Industrials whiskers away from record highs. The missing ingredient over the past several months has been participation by the mid and small caps but that looks to be changing, emphasized in today’s report – though strength must continue. Nonetheless, the CG is not even close to overbought and that should allow a durable breakout to record highs by the large caps. In a way, the CG is perfectly positioned here, recent test of neutral, with a rising trend in its infancy.
Top performing group last week, the S&P 600 Small Cap Index, +4.9%. Rally is nearing 1000, the ceiling for the past year. A breakout that holds, would certainly provide the market with a confidence boost.
The P&F chart also shows good action with this month’s rally defeating a Bearish Trendline, pulling up from a Double Top buy signal. The correction of the past year appears to be over, with the primary uptrend muscling back.
Given the returning strength here, all stock today highlights are small-caps.
The broad NYSE Composite added 1.5% last week, pulling up from 13000, now support. With momentum, the 14-day RSI, not being overbought, new 52-week highs are achievable by month end. The record high from 2018 waits at 13637.
The NYA Point & Figure chart printed a 3 box reversal up last Wednesday. A fresh Double Top breakout is two boxes away (13400 needed). Present buy signal has been in effect since March.
A week ago we highlighted returning strength to the Consumer Discretionary ETF. An industry related ETF, Invesco Dynamic Retail, rallied +3.1% last week. The price is breaking out to new 2019 highs, clearing the $36 to $38 seven month range. The fund is now in its third month of outperformance against the S&P 500, ending a prolonged period of underperformance. Three small-caps from the industry are analyzed today.
The P&F chart generated a buy signal last week, a Double Top, also defeating a Bearish Trendline. Strong possibility the primary uptrend is reasserting.
A list of PMR constituents can be found here.
Another outperforming fund last week, the iShares Transports ETF, +5%. The price rapidly recovered at the end of August from a failed breach of the low from early June, resulting in a 3SR.
The P&F chart confirmed a buy signal on September 5th, with trading now nearing the resistance ceiling across $200. That test would be the fourth in two years and should it succeed, a wave of short-covering should fuel a swift extension higher.
Factsheet for the IYT can be found here.
Skywest climbed 9.2% last week, extending the recovery off the August failed break of June support, a confirmed 3SR. New 52-week price highs imminent, the chart is not overbought here. Relative line ratio is also showing promise with a 3SR of its own.
The SKYW P&F price and relative charts are both on buy signals. A P&F 3SR is labelled. All-time high is with in striking distance.
Materion outperformed last week with a rally of 9.4%. The primary uptrend is resuming following the August correction bottom, a 3SR across from the May 31st low. The on-balance-volume indicator is bullish, at a record high. Relative ratio resuming its uptrend.
The MTRN P&F price and relative charts are both on buy signals. The present upside resumption follows a successful pull-back into the 30-week moving average.
Quaker Chemical added 5.9% last week. Interestingly, there was insider selling ahead of the strength last week, a sign that even those in the know were fearful with the August drop to 52-week lows. The price is now making the right moves, a recovery back above the breached 2018 low, resulting in a 3SR. A little more strength will reclaim support from the 500-day exponential moving average, and when that happened back in 2016, a sizeable rally followed. Volume activity is bullish and momentum is comfortable.
The KWR Point & Figure chart further illustrates the false break of the end of 2018 low, a P&F 3SR. The recent Triple Top breakout confirmed that 3SR. Needed now is a box fill at $182 to defeat the Bearish Trendline.
Abercrombie & Fitch jumped 20% last week – it hit a 52-week low only two weeks ago! The chart shows a classic failed breakdown of the $15 shelf, support over the past year. The turnaround constitutes an immature 3SR; volume activity is bullish.
The ANF P&F price and relative charts also both show 3SRs, although the relative chart needs a little more work, three further box fills to complete stage 3 of the signal. News-flow supports the 3SR – sentiment has been poor for some time. The stock is speculative; the P&F stop-loss at $13.50 is best adhered to.
Winnebago, also a small-cap retail/discretionary recovery play. Last week saw a surge of 19.4%, a move that followed a minor 3SR across the low from June 3rd. Momentum, the 14-day RSI, has room to rise, and that should allow an extension to new 2019 highs in a few weeks time. Note the major 3SR also in play with the big reversal at the end of 2018.
The WGO P&F price chart is on a sell signal but the move has tired, evident with a bullish Low Pole activating last week. The 2019 uptrend is likely reasserting, defeating the correction off the early 2018 peak.
Unifi, a small-cap textiles manufacturer, also took off last week, +16.3%. This chart also exhibits a 3SR signal, dummy break of 2016 support, a shake-out, then the present short-squeeze. The relative line ratio, against the S&P 500, has turned up from support dating back to 2012. News-flow also suits a contrarian play, in that there have been executive departures over recent months.
The UFI P&F chart confirmed a buy signal just over a month ago, with a challenge underway of a two year Bearish Trendline. It may need to consolidate soon to unwind the present overextended column of Xs and that would be the time to consider entry.