Update to Last Week's Herd Report

First, we have the framework of the S&P. It is trending up, and has formed a cup-and-handle pattern. This pattern is considered a topping pattern, with a reversal probability relatively high. This is actually a triple-topping pattern. So I expect to see a reversal heading downward.

From last week’s post on herds, let’s see what happened this week.

First, I indicated that KOL was up, and that it’s relative strength for the 5 day was 4.5%, and it’s relative strength for 20 day was 5.5%. The relative strength slope was negative, the weekly was lower than the monthly. The probability for a change in trend was high. This week, KOL’s relative strength is 1%. The 20 day is 4.8%. So we are seeing that KOL is beginning to rest and may be heading for a downward trend, considering the framework of the S&P. This is what we expected, looking at the daily relstr and weekly relstr.

The next up was $DJTATO the titans auto herd. Similar to KOL, the weekly was lower than the monthly relative strengths, so we would similarly expect a slowing or possible trend reversal. This week, the relative strength is -.5%, with the monthly at 0. $DJTATO is beginning to rest, as expected, and may be headed for a downward trend.

XME, again similar to KOL, the weekly was lower than the monthly. Again it too is slowing or possible trend reversal.

SLX was flat, at 1% for both the weekly and monthly. The trend of the S&P was up, so we would expect SLX to go with the S&P. In fact, this week it did track upwards with the weekly strength at 1.1% and the monthly has fallen to about 0.5%. So we would expect the steels to continue their upward trend.

Last week, I indicated XTXI and WFT looked great. However, like KOL, their 5 day was significantly below their 20 day performance, so I would have expected, like KOL, that they would retreat this week. They did not. XTXI did a little, but is still at 3.9% for the 5 day, and 17% for the monthly, and WFT is gangbusters at 7% for the 5-day and 8% for the 20 day. Even though a conservative approach for the energy sector was indicated, this sector is still very strong. The relative strength indicator continues to indicate this sector will outperform the S&P next week.


The precious metals sector looked very good with the 5-day relative strength higher than the 20 day on nearly every indicator. We would have expected these to outperform the S&P this week. But they did not. What happened? Looking back at the 5-day strength indicator, it had begun to turn over, with the slope going negative. This trend continued this week.

On the techs, the only uptrend was $DJULTC. Like KOL, the weekly was below the monthly, so we would have expected a rest or perhaps start a downtrend.

All the oils were higher on the weekly than the monthly, so we would have expected the uptrend to continue. It did. Although $DJTENG,, IYE, OIH and USO were beginning to rest, their relative strength was still higher than the S&P (which is down this week). The one that’s beginning to slope downwards is $OIX.X.

XOP, and XES, our shining star from last week, has done the same as KOL. The daily was lower than the weekly, and we’ve seen a rest in the uptrend. The daily is still above the S&P, but just barely.

On the retails, I look at what I wrote last week, and I musta been on drugs. They were all below the S&P. What was I thinking? And they fell again this week so they’re below the S&P by 1% or more. I gotta be more careful what I put here.

In conclusion, most of the herds exhibiting a positive relative strength to the S&P last week are at least resting, and some have moved below the S&P. Of the ones that seemed to be a surprise, we saw the slope of the relative strength curve turning direction. Therefore, we must consider the daily relstr as an indicator of what the weekly will be doing, plus we need to look at the slope of the daily to determine the probability of next week’s daily performance.

Next herd report, I’ll change the format to be:
20 day___5day___5day slope

And I’ll use underbars so the columns will line up.

If it’s OK with Thor, or perhaps for the weekend thread, I’ll post the herd report again in this format. Thor, Lemee know.