DOW INDUSTRIALS SPDR TESTS APRIL LOWS -- SEMIS AND NETWORKING ETFS LEAD TECH SECTOR LOWER -- GOLD MINERS ETFS TEST MAJOR SUPPORT LEVELS -- METALS & MINING SPDR NEARS 2011 LOWS -- AGRICULTURE ETF CONSOLIDATES AT SUPPORT
DOW INDUSTRIALS SPDR TESTS APRIL LOWS... Link for todays video. The Dow Industrials SPDR (DIA) is clearly in a downtrend since early May. How far will this decline extend? The April lows mark the first test and the March lows mark the second test. Chart 1 shows DIA trying to firm around 120-121 the last four days. There is potential support here from the April low and the November trendline. After a 4% decline the last five days, the ETF is also short-term oversold. The combination of oversold conditions and potential support could lead to a bounce. It would, however, take more than just an oversold bounce to reverse the six week downtrend. DIA remains well below the May trendline and the late May high. A move above these levels is needed to fully reverse this short-term downtrend. Barring a bounce, the July trendline and March lows mark the next support levels.
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Chart 1
CCI is shown in the indicator window. This momentum oscillator dipped below -100 twice in the last few weeks. CCI established resistance at the zero line in between these dips. A break above this resistance is needed to turn CCI (momentum) bullish again. Notice how CCI broke above similar resistance levels in early December and late March.
SEMIS AND NETWORKING LEAD TECH SECTOR LOWER... Chart 2 shows the Semiconductor HOLDRS (SMH) breaking its late August trendline with a sharp decline the last few weeks. With todays sharp decline, the ETF is testing the April lows. SMH may have support around 33.50 from these April lows, but prices have yet to show any signs of firmness to confirm such a support level. The next significant support level resides around 32. Overall, the ETF has a potential Double Top working with support at 32 and resistance around 37. Support in the 32 area is confirmed by a 38% retracement of the August-May advance. At this point, the Double Top is potential. It would take a clear support break to confirm this bearish reversal pattern. Chart 3 shows Texas Instruments (TXN) getting hammered the last six days. This key semiconductor stock formed a lower high in April and the next support is around 32 from the 2011 lows.
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Chart 2
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Chart 3
Chart 4 shows the Networking iShares (IGN) breaking below its April low with a sharp decline the last five days. The ETF also broke the July trendline in the process. There are two support levels to watch going forward. First, the 50% retracement and the November consolidation mark potential support around 31. Second, the October consolidation and 62% retracement mark potential support just above 29. These are potential support levels because the ETF is currently in a free fall. There are no signs of firmness and we have yet to see a selling climax. The indicator window shows the Price Relative, which reflects the performance of IGN relative to the market (SPY). IGN has been underperforming since early March. The Price Relative recently broke below its April lows as well.
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Chart 4
GOLD MINERS ETFS TEST MAJOR SUPPORT LEVELS... After a bounce off their 2011 lows in mid May, the Gold Miners ETF (GDX) and Junior Gold Miners ETF (GDXJ) are already back at support. Chart 5 shows GDX hitting its support zone in mid May and bouncing with a move above 58. This bounce has been completely erased with a decline back to support over the last six days. Overall, the pattern since October looks like a massive Double Top with support in the 53 area. Of course, this pattern does not look as massive on a weekly chart going back 3-4 years. Nevertheless, the pattern is there and potentially bearish. A break below the 2011 low would confirm the pattern and target further weakness towards the July lows, which mark the next support level.
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Chart 5
The indicator window shows GDX relative to the Gold SPDR (GLD). While GDX tested its December high in April, this Price Relative formed a lower high as GDX underperformed. GDX continued to lag gold as the Price Relative broke below its January low and hit a new 52-week low today. Gold Miners have been known to lead gold and this relative weakness is not a good sign for bullion. Chart 6 shows the Junior Gold Miners ETF (GDXJ) with a similar pattern at work.
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Chart 6
METALS & MINING SPDR NEARS 2011 LOWS... Chart 7 shows the Metals & Mining SPDR (XME) also testing support from the 2011 lows. XME formed a small Double Top in April-May and broke support later in May. The ETF is one of the downside leaders on Wednesday with a 2+ percent decline. The Fibonacci Retracements Tool extends from the July low to the April high to mark potential downside targets. A 50% retracement of the entire advance would extend to the 60 area.
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Chart 7
AGRICULTURE ETF CONSOLIDATES AT SUPPORT... Chart 8 shows the Agriculture ETF (DBA) with a triangle consolidation near support from the March lows. The direction of the break will dictate the next signal. Overall, the bears appear to have control of the big trend. A lower high formed in April and the ETF is on the verge of breaking support. It is also possible that a large descending triangle is taking shape. Despite a trend bias, the triangle holds the real key. An upside breakout would be bullish, while a downside break would be bearish. RSI is also in bear mode after two dips below 30. Securities become oversold in downtrends more often than in uptrends. RSI moved back to its centerline (50) as DBA traded flat the last few weeks. With the 50-60 zone acting as resistance in a downtrend, this consolidation may be about to end with a support break.
