STOCKS TURN MIXED - SMALL-CAPS AND MID-CAPS LEAD MARKET - TECHS START TO LAG - FINANCIALS SPDR BREAKS MAY HIGH - REGIONAL BANK SPDR MAKES IT 10 STRAIGHT - REIT ETF POWER PAST JUNE HIGH

MARKET TURNS MIXED... Link for todays video. Stocks turned mixed on Tuesday. The Russell 2000 ETF (IWM) and S&P 400 MidCap Index (MDY) spent most of the day in positive territory, but the Nasdaq 100 ETF (QQQQ) spent most of the day in negative territory. In the middle, the S&P 500 ETF (SPY) and Dow Diamonds (DIA) oscillated between positive and negative territory throughout the day. The major index ETFs would have remained mixed but for a surge in the final 10 minutes of trading. Chart 1 shows the Dow surging over 30 points just before the close. Notice how the Dow moved from positive to negative in the final 20 minutes of trading. Chart 2 shows sector performance for Tuesday. Five of nine sectors were up, but only one was up more than 1%. Four of nine were down on the day with utilities leading the way lower. Even though the major index ETFs closed in positive territory, the day was mixed.

Chart 1

Chart 2

SMALL AND MID CAPS LEAD... Chart 3 shows the Russell 2000 ETF continuing its March higher. The ETF advanced from 48 to 57 over the last 17 days. Thats about 58 cents per day. Except for a few large moves, most gains have been small as the ETF works its way higher. Nonetheless, a gain is a gain. Even though upside momentum appears to be slowing, we have yet to see any actual weakness or selling pressure since the surge started. Declines have been limited to 1-2 days with a new reaction high following soon thereafter. Chart 4 shows the S&P 400 MidCap ETF (MDY) with a 17% gain in the last 17 days. Not bad, 1% per day. Like the rest of the market, this move is long on tooth and ripe for a pullback or correction (cue broken record). Broken resistance around 107-110 turns into the first support level to watch - if and when we get a pullback.

Chart 3

Chart 4

FINANCE SECTOR LEADS... Over the last 10 days, the finance and materials sectors have been leading the market. It is an odd pairing, but such strong outperformance is enough to keep the broader market buoyant. Chart 5 shows the S&P Sector PerfChart from 21-July to 3-August (10 trading days). Sectors are shown relative to the S&P 500. This is NOT absolute performance. I clicked on the S&P 500 tab (filled) and box (hollow) to toggle between absolute performance and relative performance. The Financials SPDR is up 4.94% more than the S&P 500, while the Materials SPDR is up 4.60% more than SPX.

Chart 5

The defensive sectors are lagging the overall market. Relative performance for the utilities, consumer staples and healthcare is negative are over the last 10 days. Perhaps the biggest surprise here is relative weakness in the technology sector. XLK is the second weakest sector over the last two weeks. Relative weakness in technology is potentially negative for the overall market. Techs represent the appetite for risk. Relative weakness shows a diminished appetite for risk.

XLF BREAKS MAY HIGH... It was a long time coming, but chart 6 shows the Financials SPDR (XLF) finally breaking above its May high with a gap up on Monday. After a run from 11 to 13.65, the ETF is up over 20% in the last 4-5 weeks. In addition, the ETF is up five days straight. XLF broke wedge resistance the second week of June and flag resistance the very next week. Relative to these breakouts, the ETF is already up substantially. Sure, XLF could extend its current uptrend, but I would hazard a guess that this move is more than 1/2 way complete.

Chart 6

REGIONAL BANKS EXTEND RUN... Chart 7 shows the Regional Bank SPDR (KRE) extending its run with another big gain on Tuesday. KRE is now up over 20% with a 10 day run. As noted last week, this wedge breakout looks similar to the Homebuilders SPDR (XHB) breakout. XHB has yet to stop as it broke its May highs this week. KRE has been lagging the market and has some catching up to do. With the July low around 17.5, the May high near 24 and the current price around 22, KRE is well over 1/2 way towards its next resistance zone.

Chart 7

REITS BLOW THROUGH JUNE HIGH... The finance sector got a lot of help from REITs on Tuesday. Chart 8 shows the REIT iShares (IYR) breaking channel resistance in July and exceeding its June highs this week. Even though todays acceleration above the June high looks promising, keep in mind that IYR is up over 25% in the last four weeks. Like the Regional Bank SPDR above, IYR appears well past the mid point of its current move.

Chart 8