Boring week, equities marching toward all-time highs practically every day of this week. Only Friday brought a bit of volatility; nevertheless, VIX closed below 16 and SPX closed at all-time closing highs. If you are a long term investor, this week was what you want to see.
I did not sell any of my positions, just rearranged my portfolio a bit by moving some money back to technology sector and China, keeping Energy & Russia.
Almost all equity sectors finished higher this week. Outperforming sectors were financials XLF, regional banks KBE, software IGV, cybersecurity CIBR and even NYSE Composit Index NYA with 1917 components closed at all-time highs. This speaks about broad participation. XLE is still holding breakout to 52 week highs. QQQ continues to lag SPX.
The answer to the question of which sectors an investor should avoid is provided in section Underperforming sectors.
In section Risk ON/Risk OFF environment, I provide an answer if traders are willing to risk more or less.
So, where do we go from here? Let’s take a look at what my models have to say.
Longterm main models
Both main longterm models remain bullish.
Weekly Socha Investing Longterm model remains bullish, no signs that one should start moving to cash or bonds.
Daily Socha Investing Longterm model is #bullish after last’s week buy signal. Additional bullish signal is that New highs and new lows are expanding, indicating that we are moving out of Wall of worry territory – upper panel, second chart.
To learn more about my models, check this link. (Just in Slovene for now)
Midterm main models
Both of my midterm models remain bullish, no sell signal. On the contrary, we have an expansion in 1 month New highs – new lows, indicating that we are close to climbing over the Wall of worry.
Volume and adv/decl oscillators are both in uptrend and in bullish zone. I would still like to see more improvement with a move above green lines.
Nothing more to comment here – bullish!
To learn more about Midterm model, follow this link. (Just in Slovene for now)
Outperforming/underperforming sectors
Outperforming sectors
China FXI, MCHI has been a big under performer since February this year. It looks like the worst is over and I expect China to outperform in the next months.
Software stocks IGV and Cybersecurity CIBR are taking back market lead and closing at ATH.
Energy XLE, Financials XLF and Regional Banks KBE all gained this week. All of them finished at 52 week highs.
See charts for more explanations.
MCHI China – the worst may be over for China, it has some catching up to do 
FXI China – the worst may be over for China, it has some catching up to do 
CIBR – cybersecurity stocks had a strong week, looks like it wants to go higher, outperforming S&P 
IGV – software stocks had a strong week, looks like it wants to go higher, outperforming S&P 
KBE – regional banks, highest weekly close since 2007 
XLE -energy new 52 week closing highs 
XLF – strong breakout to 52 week highs
Russia – RSX was a laggard this week, moving nowhere, closing exactly where it started the week. After big run, some consolidation is to be expected. USDRUB pair moving lower which is still favourable for RSX. See previous blog for explanation.
Underperforming sectors
Latin America ILF and Brasil EWZ big laggards this week.
Keep an eye on ARKK which looks like it had a false breakdown. Healthcare XLV had a strong week, but still below 10 SMA weekly.
XME – consolidating its gains, keep an eye on this one. IWM gaining slowly but going almost nowhere for 7 months.
QQQ and SMH are still under performing S&P, but nothing critical. They both look good for a move higher.
MAGA stocks sold off on Friday, underperforming SPX for a while now. I would like to see them participate. Nothing critical for now.
See charts for more explanations.
I would continue to avoid GLD, TLT, ILF and EWZ.
EWZ – terrible week for Brasil, no time to rush in and catch falling knife. Bottoming is a process. 
ILF – similar to Brasil, terrible week for Brasil, no time to rush in and catch falling knife. Bottoming is a process. 
ARKK – false breakdown? 
XME – consolidating it’s gains after big move from Marc 2020 lows 
IWM – going nowhere, staying between lines, but slowly improving 
SMH – laggard, but hanging in there for now 
QQQ – lagging, but gained this week 
XLV – strong week, but still below 10 SMA weekly 
MAGA – sell off on Friday, there is no bull market without large caps participating. Still has work to do. 
TLT – bonds hovering below 50 SMA weekly 
GLD – hovering below 50 SMA weekly
Risk ON or OFF environment?
This week markets still in RISK ON mode. I added QQQJ Nasdaq Next Gen and IPO ETF to my analysis. If market participants invest in these stocks, it means they are willing to risk more.
Additional Risk ON sign is that traders are piling into Crypto – GBTC.
See charts for more explanations.
SPX is outperforming majority of defensive assets like XLU, XLP, TLT, GLD. Junk bonds JNK are outperforming US treasuries IEF while High Yield bonds HYG outperform TLT.
SPY/GLD – Risk ON 
SPY/TLT – Risk ON 
SPY/XLU Utilities – Risk ON 
SPY/XLP Staples – Risk ON 
HYG/IEI – Riskier High Yield bonds outperform treasuries- risk ON 
JNK/IEF – Junk Bonds outperform treasuries – risk ON 
GBTC – Crypto mixed week but bullish, Risk ON 
QQQJ – Nasdaq Next gen – looks ready to breakout higher, if that happens it is Risk ON 
IPO ETF – looks like it wants to go higher, if that happens it is Risk ON
Conclusion
Both Longterm and Midterm Socha Investing models remain bullish markets.
Newhighs – newlows indicate that we are slowly climbing over Wall of worry and that we are almost over it.
Sectors that remain strong – Energy, Financials, Regional Banks, Software and Cybersecurity.
China looks like it bottomed and is ready to outperform in the next months.
Avoid Gold, Treasuries and Latin America.
Stay bullish, stay healthy and good luck.
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