Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Technical Analysis

The stock market may finally be undergoing a minor corrective episode after numerous warnings of negative breadth and excessively giddy sentiment. However, the intermediate-term trend is still up. If history is any guide, downside risk should be limited to -5% or less. Respect the uptrend. Buy the dip.

The stock market may finally be undergoing a minor corrective episode after numerous warnings of negative breadth and excessively giddy sentiment. However, the intermediate-term trend is still up. If history is any guide, downside risk should be limited to -5% or less. Respect the uptrend. Buy the dip.

Cross Asset Strategy

Despite all of the technical warnings about negative breadth, the S&amp;P 500 has been undergoing a ride along its upper Bollinger Band. While conventional technical analysis would view episodes of negative breadth divergences as bearish, there are good reasons for the bullish resilience of the S&amp;P 500.The top five sectors comprise about 75% of the weight of the index, and their relative performance determines the market’s direction. An analysis of the June relative performance of these sectors shows that three of the five — representing 43.4% of the index weight — are exhibiting positive relative strength. This is in turn putting upward pressure on the index.The stock market is also underlying an internal rotation between value and growth. Ed Clissold of Ned Davis Research wrote, “The back-and-forth leadership is the reason market breadth has been so resilient.”In the short run, count on more back-and-forth value and growth rotation that supports stock prices. History shows that the DJIA seasonal pattern in July is bullish. Enjoy.

Despite all of the technical warnings about negative breadth, the S&amp;P 500 has been undergoing a ride along its upper Bollinger Band. While conventional technical analysis would view episodes of negative breadth divergences as bearish, there are good reasons for the bullish resilience of the S&amp;P 500.The top five sectors comprise about 75% of the weight of the index, and their relative performance determines the market’s direction. An analysis of the June relative performance of these sectors shows that three of the five — representing 43.4% of the index weight — are exhibiting positive relative strength. This is in turn putting upward pressure on the index.The stock market is also underlying an internal rotation between value and growth. Ed Clissold of Ned Davis Research wrote, “The back-and-forth leadership is the reason market breadth has been so resilient.”In the short run, count on more back-and-forth value and growth rotation that supports stock prices. History shows that the DJIA seasonal pattern in July is bullish. Enjoy.

The good news is the S&amp;P 500 rallied to a marginal all-time high last week. The bad news is it was accompanied by numerous negative divergences. How investors react to current conditions will depend on their time horizon.Investment-oriented accounts need to recognize that the primary trend is still up. Stay long equities and don’t worry about minor blips in the market.On the other hand, traders don’t need to be always aggressively long or aggressively short. This is a time to step to the sidelines. Our base-case scenario calls for a period of sideways and choppy sideways price action. Pullbacks should be relatively shallow and limited to drawdowns of 5% or less.

The good news is the S&amp;P 500 rallied to a marginal all-time high last week. The bad news is it was accompanied by numerous negative divergences. How investors react to current conditions will depend on their time horizon.Investment-oriented accounts need to recognize that the primary trend is still up. Stay long equities and don’t worry about minor blips in the market.On the other hand, traders don’t need to be always aggressively long or aggressively short. This is a time to step to the sidelines. Our base-case scenario calls for a period of sideways and choppy sideways price action. Pullbacks should be relatively shallow and limited to drawdowns of 5% or less.

We believe the stock market is poised for additional advances in early June. Expect value stocks to take a breather and a counter-trend rally by the lagging growth names. However, be prepared for the possibility for the S&amp;P 500 to churn sideways for the next two weeks as the market undergoes an internal rotation from value to growth stocks.

We believe the stock market is poised for additional advances in early June. Expect value stocks to take a breather and a counter-trend rally by the lagging growth names. However, be prepared for the possibility for the S&amp;P 500 to churn sideways for the next two weeks as the market undergoes an internal rotation from value to growth stocks.

We have been writing about the possibility of a blow-off top ever since the S&amp;P 500 rose above its rising trend line (see <a href="https://www.smartkarma.com/insights/a-blow-off-top-ahead" target="_blank" rel="noopener">A Blow-off Top Ahead?</a>). In the past, blow-off top episodes were characterized by a spike upward in one week, followed by a precipitous drop the next week.This time, the S&amp;P 500 experienced a slow-motion pullback as it visited the site of the 50 dma during two consecutive weeks. Is the pullback over?We conclude that neither the bulls nor the bears have full control of the tape. Our base-case scenario calls for a range-bound market. Tactically, the market was oversold and it was due for a relief rally. We are open to the possibility that the market could test the old highs and make marginal new highs. We would monitor these bullish tripwires as signals that the bulls have regained control of the tape:•           A wholesale violation of relative support by the defensive sectors of the market.•           The VIX Index decisively falls through its 20 dma, which would be a signal of bullish momentum.On the other hand, if the VIX maintains support at its 20 dma, expect a sideways choppy market and a possible retest of the S&amp;P 500 50 dma.

We have been writing about the possibility of a blow-off top ever since the S&amp;P 500 rose above its rising trend line (see A Blow-off Top Ahead?). In the past, blow-off top episodes were characterized by a spike upward in one week, followed by a precipitous drop the next week.This time, the S&amp;P 500 experienced a slow-motion pullback as it visited the site of the 50 dma during two consecutive weeks. Is the pullback over?We conclude that neither the bulls nor the bears have full control of the tape. Our base-case scenario calls for a range-bound market. Tactically, the market was oversold and it was due for a relief rally. We are open to the possibility that the market could test the old highs and make marginal new highs. We would monitor these bullish tripwires as signals that the bulls have regained control of the tape:•           A wholesale violation of relative support by the defensive sectors of the market.•           The VIX Index decisively falls through its 20 dma, which would be a signal of bullish momentum.On the other hand, if the VIX maintains support at its 20 dma, expect a sideways choppy market and a possible retest of the S&amp;P 500 50 dma.

United States

SPDR S&P 500 ETF Trust is an exchange-traded fund incorporated in the USA. The ETF tracks the S&P 500 Index. The Trust consists of a portfolio representing all 500 stocks in the S&P 500 Index. It holds predominantly large-cap U.S. stocks. This ETF is structured as a Unit Investment Trust and pays dividends on a quarterly basis. The holdings are weighted by market capitalization.

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SPDR S&P 500 (SPY US)

Respect the S&P 500 Uptrend

The stock market may finally be undergoing a minor corrective episode after numerous warnings of negative breadth and excessively giddy sentiment....

Cam Hui

The Resilient S&P 500

While conventional technical analysis would view recent episodes of negative breadth divergences as bearish, there are good reasons for the bullish...

Cam Hui

A New S&P 500 High, But...

The S&P 500 rallied to a marginal all-time high but it was accompanied by numerous negative divergences. How investors react to current conditions...

Cam Hui

The Wall at S&P 4200

We believe the stock market is poised for additional advances in early June. Expect value stocks to take a breather and a counter-trend rally by...

Cam Hui

Is the S&P 500 Pullback Over?

We conclude that neither the bulls nor the bears have full control of the tape. Our base-case scenario calls for a range-bound market.

Cam Hui

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