TRADING GETS AWFULLY QUIET IN SMALL AND MID CAPS -- DOW TRANSPORTS BREAK CHANNEL RESISTANCE -- GOLD FIRMS IN KEY RETRACEMENT ZONE -- AGRICULTURE ETF FORMS PENNANT AFTER SUPPORT BREAK -- CORN ETN FAILS AT RESISTANCE
TRADING GETS AWFULLY QUIET IN SMALL AND MID CAPS... Link for todays video. Trading activity slowed considerably over the last two days as the Russell 2000 ETF (IWM) formed two very small candlesticks. Chart 1 shows IWM making a breakout attempt on Monday, but falling back on Tuesday with a very small candlestick. A similar small candlestick formed at resistance again on Wednesday. With a small high-low range and little change from open to close, small candlesticks represent indecision. Indecision, however, is not the same as selling pressure. It simple represents a stalemate between bulls and bears. What happens after this stalemate will dictate the next short-term move. A move above 84 would signal yet another continuation higher, while a move below the lows of the last three days would argue for a pullback from resistance. It is still way too early to even think about a medium or long-term trend reversal because IWM remains well above its early March low and its 200-day moving average. Chart 2 shows the S&P MidCap 400 SPDR (MDY) stalling the last four days with a possible broadening-formation taking shape since early February. Notice that both IWM and MDY have been underperforming the S&P 500 since early February.
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Chart 1
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Chart 2
DOW TRANSPORTS BREAK CHANNEL RESISTANCE AND CHALLENGE FEBRUARY HIGHS... Last week I wrote about relative weakness in the Dow Transports and the non-confirmation between the Dow Industrials and Dow Transports. Chart 3 shows the Dow Transports breaking channel resistance with a big surge right after I wrote that. The Average tested its early February highs and a break above 5400 would confirm the recent high in the Dow Industrials. With the big move, chartists can set key support at 5000, which is near the early March low. A move below this level would clearly reverse the current uptrend. The indicator window shows the performance of the Dow Transports relative to the Dow Industrials ($TRAN:$INDU). The Transports lagged the Industrials from late January to mid March, but this price relative broke resistance last week as the Transports started to outperform again.
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Chart 3
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Chart 4
GOLD FIRMS IN KEY RETRACEMENT ZONE... The Gold SPDR (GLD) moved sharply lower the first two weeks of March and then firmed over the last few days. Even though the medium-term trend is down, note that the ETF formed a falling wedge and retraced 50-61.80% of its prior advance. Both the pattern and the retracement amount are typical for corrective moves. The correction, however, has yet to reverse as gold remains on the defensive. Chart 5 shows GLD with Heikin-Ashi Candlesticks, which are based on two days of price action. This makes them less volatile than normal candlesticks and better trend followers. At this point, it would take a long white Heikin-Ashi Candlestick to signal a trend reversal. Ideally, this candlestick should close above 163. The indicator window shows Aroon Down crossing above Aroon Up and hitting 100 at the end of February. This indicator remains bearish until Aroon Up crosses back above Aroon Down. Chart 6 shows GLD with normal candlesticks for reference. Notice that a small pennant formed with the bounce back above 161 and the ETF broke the lower trendline the last two days. This pennant is a bearish continuation pattern and the break signals a continuation lower. Again, look for a move above 163 to reverse this signal. Chart 7 shows the Silver Trust (SLV) for reference.
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Chart 5
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Chart 6
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Chart 7
AGRICULTURE ETF FORMS PENNANT AFTER SUPPORT BREAK... The Agriculture ETF (DBA) could be resuming its long-term downtrend with a sharp decline this month. Chart 8 shows DBA trading range-bound in January-February and then breaking range support with a sharp decline in early March. Prior to this support break, the ETF failed at 29.50 twice, a level that marked a 50% retracement of the prior decline. The failure at resistance and break of support are bearish. DBA formed a small pennant/wedge last week and broke the lower trendline with a decline the last two days. This signals a continuation of the March decline and targets further weakness towards the December low at least. The indicator window shows RSI hitting resistance in the 50-60 zone from October to March. RSI needs to break its 2012 highs to reverse bearish momentum. DBA needs to exceed 28.75 to recapture bullish attention. Chart 9 shows weekly prices and a downtrend in force since February 2011.
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Chart 8
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Chart 9
CORN ETN FAILS AT RESISTANCE... As its name implies, the Agriculture ETF consists of various agricultural products, which are listed on the chart and can be found at the PowerShares website (www.invescopowershares.com). Chartists can follow some of these components using the corresponding ETNs, while others can be followed using Dow Jones-UBS indices or the spot price. Simply search the symbol catalog for the commodity name to see the choices available. You might be surprised how many commodities are followed here at StockCharts. Chart 10 shows the Corn Trust Fund (CORN) hitting resistance in the 41.6 area and falling sharply the last three days. A break below the March lows would signal a continuation of the prior decline, which ran from August to December. Chart 11 shows the Sugar ETN (SGG) within an uptrend that began in mid December. Chart 12 shows the Livestock ETN (COW) breaking down in early March and falling sharply the last few weeks.
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Chart 10
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Chart 11
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Chart 12
Even though there is a Wheat ETN (WEAT), it is quite thinly traded and chartists may prefer looking at the Wheat Subindex from Dow Jones-UBS. Chart 13 shows the DJ-UBS Wheat Index ($DJAWH) hitting resistance from October to February and forming a triangle in February-March. With a sharp decline the last three days, this index is on the verge of breaking support, which would target a test of the December lows.
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Chart 13
DOW JONES SOYBEANS INDEX REMAINS IN STRONG UPTREND... Chart 14 shows the Soybeans Subindex ($DJASY) in a clear uptrend. Even though the index moved sharply lower on Tuesday, it rebounded on Wednesday and remains well above its December trendline. With these commodity indices and ETNs, chartists can analyze the individual components to better understand the trend for the Agriculture ETF. The five index/ETN charts shown represent around 70% of this ETF.
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Chart 14
COMMODITIES FOLLOWED AT STOCKCHARTS.COM ...
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Chart 15
