“Don’t Confuse Brains With a Bull Market”
Humphrey Neill
Weekly market commentary will be shorter this week since no major changes occured. We had another strong week, especially Tech and Semis. Large caps seem to outperform small caps, which on it’s own is not a bearish sign. Market valuation of Russel 2000 is just a fraction of total stock market, so it is not a big tragedy if it under performs, but for sure it is better if it participates.
To paraphrase last week’s comment; market gods remain bullish.
So, where do we go from here? Let’s take a look at what my models have to say.
The answer to the question of which are Outperforming sectors and which sectors should be avoided is provided in section Underperforming sectors.
Disclaimer: Please not that my view is mid to long term, meaning weeks or months into the future. When I am bullish markets it does not mean that next few days cannot be red. In majority of cases I adjust my portfolio on weekly bases trying to filter out the daily noise. Only rarely I adjust my positions based on daily stock market moves.
Longterm main models
Both Socha Investing longterm models remain bullish.
- Weekly Longterm model remains bullish. See first chart for more explanation.
- Added a new indicator based on vix which precedes bigger pullbacks or corrections. It flashed two weeks ago but there was no confirmation the week after, so I ignored it.
- Daily Longterm model also stays bullish; new highs minus new lows contracted a lot this week. See second chart for more explanation.
To learn more about my models, check this link. (Available also in English)
1. Weekly chart – Socha Investing Long term model – 52 week new highs minus new lows are rising, new lows rising as well but nothing critical – #bullish. 
2. Daily chart – Socha Investing Longterm model – 6 and 3 months New highs minus new lows contracted this week (green line),while new lows (red line) are rising again – still #bullish
Midterm main models
3. Weekly midterm model remain bullish, no sell signal. See chart 3 fore explanations.
4. Daily midterm model remains bullish as well, no sell signal. See chart 4 for more explanations.
Some caution is advised based on ADV/DECL and volume oscillators, but nothing major for now.
To learn more about Midterm model, follow this link. (Available also in English)
3. Weekly – Midterm model – 1 month New highs minus new lows line still in bullish territory. Upper Bollinger band is ignored for now which could mean more sideways consolidation or move higher 
4. Daily – Midterm main model – some bearish signs here – ADV/DEC oscillator moved into neutral territory, as well as volume oscillator. No need to panic just yet. Next week should reveal more.
Outperforming/underperforming sectors
Trend strength indicator:
I added a new indicator with which I track performance of sectors. Second panel from bottom up. Purple line represents trend strength of underlying symbol; while orange line represents relative strength vs. S&P 500.
If both lines are moving higher and they stay in green area this is bullish; the opposite is true if both lines are moving lower and end in red area.
Green triangle: Strong absolute trend – Bullsih
Black triangle: Strong absolute and relative trend – Very bullish
Red triangle: Weak trend strength – Bearish
No sign: Neutral
Outperforming club
Technology sector continues to lead. QQQ Nasdaq 100, XSD & SMH semiconductors are the strongest.
Large caps AMZN, MSFT, GOOGL, AAPL, NDA and FB broke out to new highs last week and continued higher this week. I like that they started to participate, bull market is not over yet.
Financials XLF and Energy XLE are kicked out of the club.
See charts for more explanations.
QQQ – strong performance 
MAGA – MSFT AAPL GOOGL AMZN – I like the development here. Relative outperformance. Bull market is not dead! 
Large caps – MSFT AAPL GOOGL AMZN FB NVDA – I like the development here. Bull market is not dead! 
XLK – strong move 
XSD – semiconductors – consolidating before move higher? 
SMH – semiconductors – already moved higher 
CIBR – cybersecurity stocks – not as strong as other tech sectors, underperformance continues. 
IGV – software stocks – continues to underperform other tech sectors. still strong though
Small and mid caps
Both holding breakout for now but underperform large caps. Is this bearish? On it’s own not, let’s see if more bearish signs start to pop up in next weeks.
Underperforming club
China may be close to forming a nice bottom, while Latin America has a lot more work to do; ARKK is lagging S&P 500 and 20 year Treasuries continue to underperform.
I would continue to avoid TLT, ILF, EEM and EWZ; while FXI, CQQQ, KWEB and also GLD may be worth to start dipping the tip of toes in.
See charts for more explanations.
ILF – still not the time to rush in and catch falling knife. Bottoming is a process. 
FXI – China – time to bottom out and move higher. New Barrons cover may indicate this is a bottom and not bearish continuation pattern. 
TLT – still underperforming, stay away 
GLD – still underperforms SPX, but could be forming a bottom, strongest of the defensive assets 
EEM – similar chart as FXI, bottoming. 
ARKK – growth stocks, continue to underperform, no time to invest in.
Risk ON or OFF environment?
This week markets still in RISK ON mode, no big changes from last week. No charts this week.
Conclusion
Both Longterm and Midterm Socha Investing models remain bullish; no sell signals, but under the surface some deterioration with money moving into large caps.
Strong sectors – Nasdaq 100, Technology, Semiconductors and Large caps FANGMAN stocks.
China bottoming process may be completing. If so expect sharp moves next weeks.
Gold also looks like it may be forming a bottom, but continue to underperform stocks.
Avoid Treasuries and Latin America.
I rearranged slightly my portfolio moving even more money back to technology, reducing further Energy & Russia; maintaining position in China.
Stay bullish, stay healthy and good luck.
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