QQQ REMAINS SHORT OF BREAKOUT -- MID-CAPS SHOWING RELATIVE STRENGTH -- FINANCE AND BANKING ETFS TURN BACK AT BROKEN SUPPORT -- MATERIALS STALLS AT RESISTANCE -- METALS/MINERS, SILVER MINERS AND STEEL ETFS HIT RESISTANCE
QQQ REMAINS SHORT OF BREAKOUT... Link for todays video. The Nasdaq 100 ETF (QQQ) surged with the rest of the market last week, but has yet to follow through and produce a meaningful breakout. Chart 1 shows QQQ falling over 10% with a move below 62 and then rebounding with a surge above 64. At this point, I consider this just an oversold bounce with a downtrend that started in mid September. Notice how the ETF established resistance just above 66 with three weekly bars. A break above these highs would suggest that the current bounce is more than an oversold bounce. Barring a breakout, I am targeting a move toward the next support zone in the 58-60 area. Broken resistance and the 50-61.80% retracements mark support here. Chart 3 shows the Russell 2000 ETF (IWM) with resistance around 83.
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Chart 1
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Chart 2
MID-CAPS SHOWING RELATIVE STRENGTH... Should the stock market build on last weeks gains and breakouts occur, look for the S&P MidCap 400 SPDR (MDY) to lead the way higher because the ETF is showing relative strength. Chart 3 shows MDY with a falling flag over the last three months. A break above flag resistance would signal a continuation higher and open the door to new highs. The indicator window shows the price relative (MDY:SPY ratio) forming a higher low in early October and breaking above its early September high. This means MDY is starting to outperforming SPY, which means mid-caps are showing relative strength. Relative strength alone is not enough to turn bullish. A flag breakout is still needed to reverse the three month downtrend.
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Chart 3
FINANCE AND BANKING ETFS TURN BACK AT BROKEN SUPPORT... The Finance SPDR (XLF) bounced along with the broader market last week, but hit resistance near broken support and a key retracement zone this week. Chart 4 shows XLF breaking down with two support breaks in November. XLF broke support at 15.75 and then moved below the late September low. After becoming oversold below 15.25, the ETF bounced back to the 15.75 area. Broken support and the 50-61.80% retracement zone now mark resistance here. Moreover, this is as good a spot as any for a peak and resumption of the prior breakdown. A continuation lower would target a move towards the next support zone in the 14.75 area.
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Chart 4
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Chart 5
Chart 5 shows the Regional Bank SPDR (KRE) hitting its resistance zone last week and turning back this week. The late October consolidation, 50% retracement and mid September trend line combine to mark resistance in the 28 area. A move above 28.5 is needed to break this zone and reverse the two month downtrend.
MATERIALS SPDR STALLS AT RESISTANCE... Chart 6 shows Materials SPDR (XLB) with a familiar chart setup. The ETF broke support with a sharp decline and broken support turned into resistance. This classic tenet of technical analysis has come into play in several ETFs over the last few days. XLB broke support around 36.50, became oversold and bounced back to the support break. This return to broken support is called a throwback. Basic technical analysis teaches us that broken support turns into resistance (and visa versa). XLB stalled in the 36.5 area Monday-Tuesday and fell back on Wednesday. This decline reinforces resistance here. The summer lows mark the next support zone in the 33.5 area.
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Chart 6
METALS/MINERS, SILVER MINERS AND STEEL ETFS HIT RESISTANCE... Broken support levels are also marking resistance for some key industry group ETFs within the materials sector. These are the first resistance levels to watch for upside breakouts and signs of strength. Chart 7 shows the Metals and Mining ETF (XME) breaking down in November and broken support turning into resistance in the 43 area. Chart 8 shows the Silver Miners ETF (SIL) failing at broken support as the 23.5 area turned into resistance. Chart 9 shows the Steel ETF (SLX) turning back near broken support at 44. The summer lows mark the next support zone in the 40-41 area. The indicator window shows the price relative (SLX:SPY ratio) breaking a triangle trend line as the ETF underperforms the broader market.
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Chart 7
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Chart 8
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Chart 9
FIRSTTRUST INTERNET ETF CHALLENGES EARLY NOVEMBER HIGH... The FirstTrust Internet ETF (FDN) is showing relative strength as the price relative breaks resistance and the ETF challenges its November high. Chart 10 shows FDN with a falling wedge retracing around 61.80% of the prior advance. FDN broke wedge resistance with a big surge the last eight days. Even though the ETF is short-term overbought after a 5 percent move, the breakout looks quite strong. Broken resistance in the 36.5 area turns first support to watch on any throwback. The indicator window shows the price relative breaking above its October high. This means FDN is showing relative strength and leading the market right now.
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Chart 10
AMAZON AND EBAY POWER INTERNET STOCKS AND GOOGLE GETS A BID ... Amazon (AMZN), Ebay (EBAY) and Google (GOOG) are the top holdings in the FirstTrust Internet ETF. Together, these three account for around 24% of the ETF. Chart 11 shows Amazon breaking resistance from the late October high with a surge above 240 the last two weeks. It looks like cyber Monday is just as important as black Friday. Chart 12 shows Meg Whitmans old company (EBAY) breaking above the September-October highs and forging a 52-week high. Not many stocks are trading near 52-week highs right now. Chart 13 shows Google gapping up on November 19th and holding the gap for over a week. The stock caught a bid today and broke pennant resistance.
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Chart 11
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Chart 12
