Strong Weekly Performance Across Equity Markets, With Small Caps Leading the Way 

It’s been another decent week in the equity markets, with US indices mainly posting gains across the board. More specifically, the S&P 500 Index is up 1.38%, and the NASDAQ is up 0.50%. The more concentrated Dow Jones Industrial Average posted the best gains with a return of 3.03%, while the more focused S&P 100 Index gained 0.81%. Once again, small and mid-cap stocks on the Russell 2000 were the stars of the show, with a notable weekly gain of 5.11%, indicating that advisors are becoming more comfortable leaving behind the "magnificent seven" mega stocks that dominated the past several years, such as Nvidia, which incidentally lost 7.23% over the past week. The picture in Canada was somewhat reversed, with the S&P/TSX Small Cap and S&P/TSX Mid Cap indices gaining 0.92% and 0.76%, respectively, while the more concentrated S&P/TSX 60 Index matched that performance with a gain of 2.05%. In the bond market, the 5-Year, 10-Year, and 30-Year CBOE bonds declined by -3.79%, -3.72%, and -3.59%, respectively, as all the volatility readings settled, warming the waters again and clearly favoring equities. The Bullish Percent readings are important to monitor as the bell curve is once again positive (bullish) and continues to build on the left side of its ledger (seen below), with some interesting movements in the sector relative strength reading, which will be reviewed next, highlighting a notable high-risk reading from the retail sector. Sector-wise, the best performance again came from the consumer discretionary sector, which gained 5.08% for the week, outperforming the consumer staples sector, which gained 3.48%. Most other sectors posted positive gains of +/- 4%, except for the materials sector, which had a minor gain of 0.98%, and energy, which lost -0.05%. This absolute performance will soon align with our main coach relative strength below in the sector scope, which continues to show low readings for energy stocks and a declining trend for materials.

The first attachment is the latest reading from the SIA Sector Scope, which provides three important pieces of data: relative strength (colors), the bullish percent level (percentage of stocks with P&F positive signals), and whether that percentage is increasing or decreasing (capital or lowercase letters). In color-coded arrows, significant sector readings are highlighted, allowing a seasoned SIA technician to glean valuable insights from the data. Starting with the sectors showing high relative strength and marked with green arrows, we see that Banking (BANK), Insurance (INSU), and Finance (FINA) are leading the pack, with a high percentage of equities in these sectors hosting market-leading stocks. Other notable sectors include Construction (CONT), Leisure (LEIS), and Conglomerates (CONG). The two yellow arrows point to troubling relative strength declines in Aerospace (AERO) and Metal & Mining (META), sectors that had been market leaders until recently, but the SIA AI has detected a decline in relative strength over the past several weeks. Turning to the red arrows, we find the potentially riskier sectors of the market, as they show little relative strength compared to the broader market. Starting on the left, Electronics and Semiconductor (ELEC) show both low relative strength and many component P&F charts with negative signals (see the November 19th Daily Stock Report for a full review of ELEC). Another sector starting to post low relative strength is Chemicals, which had typically been an outperforming sector, alongside Health, though this decline is not surprising. The big elephant in the room, however, is the retail sector (RETA), which, given that tomorrow is Black Friday, may warrant a closer look. Although the RETA sector shows low relative strength (RED), it still has many components with P&F positive signals (79%-87%). Should this reading turn negative (lowercase letters, i.e., reta), it would represent a high-risk reading, combining low relative strength and a high BP reading, indicating a sector vulnerable to a potential drop. This sector has been circled in red.

Drilling deeper into the retail sector, a dichotomy emerges. The top of the SIA Retail Sector Report is dominated by high relative strength names that have performed wonderfully year-to-date (YTD), while the bottom group, highlighted in a red box, consists of names that have underperformed with dismal YTD returns. Some, such as Dollar Tree (#44) and Dollar General (#47), have experienced massive declines. Notably, the names in the red box also have very low SMAX readings, further underscoring their underperformance compared to other asset classes. To contextualize this list, remember that the sector scope reading above indicates that this entire list has low relative strength relative to other sectors, meaning the names in the red box are the worst performers, and as such, we have labeled them as "Risky Segment of the Market." However, there are names that stand out. One such name is Walmart, which has delivered great performance this year, with a 76.56% rate of return and continued solid gains, including a 5.39% increase this week, far outpacing the S&P 100 Index’s weekly gain of 0.81%. SIA Charts’ relative strength rankings help advisors identify opportunities in stocks that are outperforming their peers or index benchmarks on a relative basis. Outperformance often reflects improving investor expectations for strong growth in a company or sector. Discover how SIACharts can revolutionize your advisory practice with its straightforward and effective tools. As T.L., a seasoned portfolio manager, puts it, “The simplest and most effective tool I’ve used in 35 years.” Designed for simplicity and efficiency, SIACharts offers a powerful market intelligence platform that enhances portfolio management with minimal disruption and maximum impact. Sign up for our FREE 3-week trial at www.siacharts.com to explore our AI-driven insights and features with no financial commitment. To maximize your trial, schedule a one-hour demo with our expert team to see firsthand how SIACharts can transform your portfolio management.