QQQ AFFIRMS RESISTANCE WITH DARK CLOUD -- RSI HITS RESISTANCE ZONE FOR SPY IWM EXTENDS TIGHT CONSOLIDATION - RETAIL SPDR FORM PENNANT AT RESISTANCE -- CHARTS FOR APPLE, MICROSOFT, GOOGLE, ORACLE AND AMAZON
QQQ AFFIRMS RESISTANCE WITH DARK CLOUD... Link for todays video. The Nasdaq 100 ETF (QQQ) further affirmed resistance just above 66 with a dark cloud pattern last week. Based on the three weekly highs in October, I first set resistance here in the 28-Nov Market Message Resistance. Dark clouds form when the open is above the prior high and the close is below the mid point of the candlestick body (open-close range). QQQ opened above 66 last Monday morning and closed below 65 on Friday to form this candlestick reversal pattern and affirm resistance. A move above last weeks high is now needed to break resistance.
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Chart 1
Taking a step back, notice that QQQ broke the internal trend line extending up from the mid August lows. This is an internal trend line because I drew through the low in October 2011. There were still at least three touches, which made this a valid trend line. QQQ broke it in October 2012 and became oversold in mid November. The bounce back to 66 alleviated this oversold condition and set the stage for resistance. A move below 64 would confirm the dark cloud and signal a continuation of the Sep-Nov decline. Notice that broken resistance and the 50-61.80% retracement zone combine to mark next support in the 58-59 area. Before leaving this chart, notice that the indicator window shows the price relative (QQQ:SPY ratio) breaking support as QQQ underperforms SPY. Chart 2 shows the Russell 2000 ETF (IWM) breaking the autumn trend line with a surge above 82 and then hitting resistance near 83. Charts for the top five QQQ components are featured in the final segment of this market message.
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Chart 2
RSI HITS RESISTANCE ZONE FOR SPY... Andrew Cardwell, an RSI expert, theorizes that RSI oscillates in bullish and bearish zones during trends. RSI fluctuates between 40 and 80 in an uptrend, and between 20 and 60 during a downtrend. A break below 40 signals an end to this uptrend, while a break above 60 ends the downtrend. This is not designed as a standalone trading system. As with all indicators, this RSI technique should be used in conjunction with other analysis techniques. Chart 3 shows the S&P 500 ETF (SPY) breaking support in late October and RSI breaking below 40. RSI continued to oversold levels as SPY plunged below 136 in mid November. The surge back above 142 alleviated oversold conditions and carried RSI into the 50-60 zone, which marks resistance in a downtrend. This is a make-or-break area for SPY. Also notice that the ETF is hitting resistance in the 142-143 area from broken support and the 61.80% retracement.
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Chart 3
Even though RSI is in its resistance zone, note that the short-term (three week) trend is still up. It all started with a gap and surged above 139 in mid November. SPY is hitting resistance, but has yet to break first support and reverse this uptrend. I am using the Raff Regression Channel to define the current uptrend. The middle line, which is a linear regression, extends from the mid November closing low to the early December closing high. The lower trend line ends around 139.5. A break below this level would reverse the three week uptrend and call for a continuation of the Sep-Nov decline. Chart 4 show the Russell 2000 ETF consolidating within a tight range the last six days.
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Chart 4
RETAIL SPDR CONSOLIDATES AT RESISTANCE... It could be a big week for retail stocks because the November retail sales will be reported on Thursday morning. Retail sales for the prior month are reported in the middle of each month. Year-on-year, retail sales actually declined in October and expectations are for a small decline in November. Note that consumer spending accounts for some two thirds of GDP. Chart 5 shows the Retail SPDR (XRT) surging above 63.5 on 28-Nov and then consolidating the last seven days. In fact, trading over the last seven days has been within the high-low range of 28-Nov. XRT basically formed seven inside days. Talk about indecision. A pennant consolidation is taking shape now and its resolution will provide the next directional clue. A break above 63.5 would be bullish, while a break below 62 would be bearish.
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Chart 5
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Chart 6
XRT is a broad-based ETF with over 90 retail stocks. The individual weightings are spread across the board with the biggest component accounting for just 1.6%. In contrast, the Market Vectors Retail ETF (RTH) has only 25 components and the top three account for over 30% of the ETF (Wal-mart, Home Depot and Amazon). Chart 6 shows RTH breaking channel resistance in the second half of November and challenging its October highs this month. Also notice that the price relative (RTH:SPY) broke out just ahead of the ETF and hit a new high in late November.
CHARTS FOR APPLE, MICROSOFT, GOOGLE, ORACLE AND AMAZON... QQQ is rather unique because of Apple (AAPL), which accounts for around 17% of the ETF. This weighting was above 20% in early September, but has fallen along with the stock price. As Apple goes, so goes QQQ. Chart 7 shows Apple breaking down in October and testing support in the 520 area over the last five weeks. The trend since September is clearly down with Fridays high marking first resistance. A close above this level would provide the first sign that a sustainable bounce off support is materializing. Notice that the price relative is also trending lower and hit a new low this month. Apple shows relative weakness and this is also a negative.
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Chart 7
Chart 8 shows Microsoft (MSFT) breaking down in September as both the stock and the price relative broke support (red arrows). Even though the stock is finding support in the 26.25 area, there is nothing but downtrend and relative weakness on this chart. Broken support turns into resistance in the 28.25 area.
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Chart 8
Chart 9 shows Google (GOOG) within an uptrend since mid November. Even though this could be a correction of the Oct-Nov decline, the short-term trend is still up as Google consolidates above 680. A close below 680 would provide the first sign of short-term weakness. Should Google hold support here, look for a break above 700 to signal a continuation of this short-term uptrend.
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Chart 9
Chart 10 shows Oracle (ORCL) leading the way with a price relative breakout in late October and a channel breakout in late November (green arrows). The channel breakout is holding as broken resistance turns support in the 31 area.
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Chart 10
Chart 11 shows Amazon (AMZN) breaking the October trend line in mid November and resistance in late November. The stock became overbought above 250 and stalled the last six days, but has yet to turn down and break first support at 247.50.
