1/ Revisiting the “Ducks”
2/ WWDKD? What would David Keller, CMT do?
3/ NAAIM Exposure Index Update
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1/
Revisiting the “Ducks”
When we started this week, many sectors of the S&P 500 had already pushed into the Green (Leading) box and the two sectors that looked rough were Consumer Staples (XLP) and Healthcare (XLV). And if you’ve been following me this week, you heard that the Healthcare sector continued to have a rough time and the news didn’t do it any favors.
One of my favorite things about RRG Charts (under normal market circumstances) is how they give decent guidance as to where parts of the market are moving. And in the case of Healthcare, the news that came out just confimred what we were already seeing in the charts and RRG rotation.
XLV aside, I also suggested a pullback (or at least a pause) was likely to happen soon, but we didn’t see it this week. What I’m still watching for is to see the bulk of the sectors in the Green (Leading) box start to push down and into the Yellow (Weakening) box. Seeing weakness across many sectors at the same time, to me, gives a great hint on the broad market’s direction in the near future – think 5-10 days forward.
What that could mean is, if you’re sitting on some good gains that you picked up near the market bottom a few weeks ago, soon it could be time to do some trimming and lock in some profits. But the market can still run from here, so there is no need to be too hasty in selling. Keep the broad market context in mind and follow your exit signals.
2/
WWDKD? What would David Keller, CMT do?
Long ago I saw David Keller, CMT use this chart in a presentation and have been using it ever since.
If you look really closely at this weekly chart of the S&P 500 ETF (SPY), you can see that this week had a nice break-out above the confluence of several moving averages (in this case, the 13, 21, and 34 exponential moving averages). Going back to my RRG chart, there was a very real possibility that this index could have failed to break above this area of resistance. But it did.
The three Percentage Price Oscillators (PPOs) at the bottom show three time-frame variations: Slow (purple), Medium (Green), and Blue (Fast). It’s like looking at multiple timeframe charts in one place, so it saves a lot of time. What I found interesting about this last pullback was that it never pushed the longer-term PPO below Zero. So when the faster signals started to turn positive, they were worth paying attention to.
So what would David Keller, CMT do? I would think he’d be scanning for the next price level to take action. I’m not completely sure, but this is a great chart to have on your list.
3/
NAAIM Exposure Index Update
This week’s NAAIM Exposure Number came in at 70.56, which was (again) lower than my reported 95. I’ve been posting numbers that have far exceeded the general index number over the past several weeks and I’ve been a little surprised to see so many active managers late to this party.
One of the useful aspects of this index is noting when it dips below 60, as that tends to be a place of interest as to when start looking for an entry. However, this tactic is less favorable when the S&P 500 is below a longer-term moving average (like a 200-day or a 40-week, depending on your preferred chart).
Since the S&P 500 has been below these moving averages since early to mid-March, this signal hasn’t been noteworthy. However, as of this week, the S&P 500 has moved back above both of these hurdles. So we’re back to game-on if these moving averages hold and the NAAIM Exposure Index dips back below the 60 level.
And finally, I’d like to thank Investopedia and the CMT Association for having me back as a guest contributor. It’s been a lot of fun (and a lot of work), but I’ve enjoyed sharing so much of what I think about on a daily basis when looking at the markets. Hopefully you were able to pick up something from my approach to technical analysis and investing in general. But now it’s Friday, so be like David Keller, CMT and celebrate the week with some pizza.
Happy Friday and Stay Safe out there!!
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Originally posted 16th May 2025
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