The S&P 500 is down to our initial target zone of 4212, which is near the 200-day avg. and a zone where we think we can see a short-term rally. Tomorrow will be key as we can either have the “pop” or a break of support that would lead to another leg down.  We do have a distributive top in place in a number of the indices, so we are not out of the woods just yet.

The distributive price action that we have been talking about at the stock and ETF level has manifested at the index level.  The S&P 500, NDX, and Russell 2000 all have the top patterns of a distributive top.

The S&P 500 has stalled under a MOB target band and the 2022 highs.  A weekly close under 4352 puts the index in a weak position.

We ranked and reviewed the constituents of the iShares U.S. Home Construction ETF (ITB) and found a 10% reduction in the number of stocks with a bullish multi-factor model score from a 1-month look back.  At the end of July, we had 79% of the constituents with a positive score compared to 69% now.  Some stocks had a large negative step size drop in their score, and the largest weighted stock in the etf, DR Horton (DHI), is one of them.  Here we review the absolute and relative trend structure of the ITB and the top five stocks in the etf and five stocks with a large drop in our model score.

We are seeing more distributive price action in the group, and today’s sharp selloff after falling under the July highs confirms that view.  After scoring and reviewing the holdings of the XHB, we found nine constituents that have tops in place along with weak absolute and relative trends based on a weekly timeframe.  For each stock, we highlight the potential downside target areas.

After pausing at the initial MOB target band, the XOP had an impulsive bullish move above that zone.  This, to us, signals a strong lack of selling, and a “buy the dip” scenario.

In this report we rank and review the 11 S&P sectors with the addition of the Energy XOP.  Both weekly and daily charts are reviewed and commented on.

We wanted to spend time and review the Russell 2000 for long ideas as we have noticed more stocks with positive money flow in that index.  The stocks we highlight here have a very good positive model score and a nice move up in that score from a 1-month look back.  We have attached the scoring of all the constituents of the index as well as our model scoring guideline.  

With our first chart on page 2, we look at the S&P 500  with the overlay of the number of stocks in the S&P 1500 with positive and negative multi-factor model scores.  We have all heard about the narrowness of the market, and these numbers bear that out.  This is a market index for sure, but beneath the surface we are able to find bullish long ideas in a number of sectors.

On page one, we highlight the chart of the S&P along with the percentage of stocks in the S&P 1500 with a positive and negative multi-factor model score.  We continue to see a lack of significantly improving scoring stocks off the March low, and there are now more stocks with a weak score since then.  The scores are slow-moving, but one would think that the strong momentum move off the lows would have produced better numbers than what we have now.

On page 2, we highlight a recent chart we sent out that shows the S&P 500 with the number of stocks with a positive and negative multi-factor model score.  In addition, it shows us the narrowness of the S&P 1500 as the number of stocks with a positive score continuing to weaken and an increase in the number of stocks deteriorating.

We highlight the S&P 500 on page 1, where we have the index turning down just under a big resistance zone at 4200.  On the following page, we overlay the percentage of stocks in the S&P 1500 with a positive and negative multi-factor technical model score, and we find a very narrowing number of stocks with a positive score. 

Our scoring of all the stocks in the S&P 1500 continues to find the majority of the constituents 71% with a weak model score and the S&P near the upper end of its trading range. The last time the percentage of the S&P 1500 had this many weak-scoring stocks was at the October 2022 low with a reading of 75%. This illustrated the narrowness of the advance.

Not much is new as the major indices remain in a trading range, with some, such as the S&P and Dow Industrials, int a resistance zone.

A number of the indices reviewed remain within a trading range, which frustrates most investors.