SPY ADVANCES FOR SIX CONSECUTIVE WEEKS -- QQQ LAGS SPY, BUT REMAINS IN UPTREND -- CONSUMER DISCRETIONARY SPDR TESTS RELATIVE PERFORMANCE TREND LINE -- XRT HOLDS CONSOLIDATION BREAKOUT -- GOLD BREAKS WEDGE SUPPORT TO EXTEND DOWNTREND
SPY ADVANCES FOR SIX CONSECUTIVE WEEKS... Link for todays video. The S&P 500 ETF (SPY) is up six consecutive weeks and ten of the last twelve (since mid November). Even though the advance has turned into a grind this year, chart 1 shows SPY continuing to gain ground with each passing week. A grind higher is not that unusual. In fact, I would suggest that the January-February 2012 advance and summer advance were also grinds that lasted around 12 weeks (yellow areas). The key is to hold the uptrend. The blue dotted trend lines mark the rate of ascent for these advances. Corrections started when SPY broke these trend lines and the Commodity Channel Index (CCI) moved below 100. Also notice that CCI remained above 100 for three months in early 2012 and for two months this past summer. Currently, SPY remains in an uptrend and well above the November trend line. CCI is also above 100. Broken resistance in the 145-146 area turns first support.
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Chart 1
QQQ LAGS SPY, BUT REMAINS IN UPTREND... Chart 2 shows weekly candlesticks for the Nasdaq 100 ETF (QQQ) with a rising wedge taking shape. Rising wedges are normally associated with corrective advances after a sharp decline. Sometimes, however, these wedges continue to rise and evolve into bigger uptrends. After a big surge above 66 the end of the year, QQQ has been working its way higher the last five weeks. This five week advance is nothing spectacular, but it is still an advance and prices are higher now than five weeks ago. The wedge trend line and 2013 lows mark a support zone in the 66-66.5 area. The bulls have a clear edge as long as this level holds. A break below 66 would signal a continuation of the Sep-Nov decline and target a move towards the 59-60 area.
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Chart 2
CONSUMER DISCRETIONARY SPDR TESTS RELATIVE PERFORMANCE TREND LINE... The Consumer Discretionary SPDR (XLY) and the Retail SPDR (XRT) will be in the spotlight because the retail sales report is scheduled for Wednesday. Retail sales is a key component for economic growth and the retail industry features prominently in the consumer discretionary sector. Chart 3 shows XLY breaking out with a gap to start the year and racing to a 52-week high in late January. The trend is clearly up, but XLY became overbought near 51 and moved into a consolidation phase the last two weeks. The pullback has been limited as the ETF established support just below 50. A break below these lows would argue for a deeper pullback that could extend to the November trend line or broken resistance in the 48 area. There is some concern now because XLY has started to underperform SPY. The indicator window shows the XLY:SPY ratio peaking in late January and flattening out in February. Notice that this performance measure is testing the August trend line.
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Chart 3
XRT HOLDS CONSOLIDATION BREAKOUT ... Chart 4 shows the Retail SPDR breaking out in January and hitting a 52-week high last week. Overall, a new high in this broad-based retail ETF is a good sign for retail sales and the economy. There was a small consolidation in late January and the ETF broke with a surge last week. This breakout is holding and support at 66 is the first level to watch. A break below this support level would signal the start of a corrective period. I would then mark next support in the 65 area. The indicator window shows the price relative breaking out in mid January and stalling the last two weeks. A break below the late January lows would signal relative weakness in this key industry group ETF.
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Chart 4
GOLD BREAKS WEDGE SUPPORT TO EXTEND DOWNTREND... Gold is under pressure on Monday as the yellow metal fell below 1650 for the first time since early January. Todays selling pressure is being blamed on weak demand in Asia because the lunar New Year started. Not sure if I buy that one. Maybe snakes and gold are incompatible. There is also a story on Bloomberg that reported big purchases by the Russian central bank. Chart 5 shows weekly candlesticks for Spot Gold ($GOLD) over the last eighteen months. Even though the falling channel could be a mere correction of the summer surge, this channel continues to fall and the trend is clearly down as long as 1700 holds. Assuming a trend in motion stays in motion the lower trend line marks the next target in the 1575 area and the May lows mark next support in the 1525-1550 area. The indicator window shows MACD(5,35,1) in negative territory, which means momentum is bearish. Chart 6 shows the Gold SPDR (GLD) breaking wedge support with a sharp move lower on Monday.
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Chart 5
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Chart 6
EURO TURNS BACK AT RETRACEMENT ZONE... The US Dollar Fund (UUP) got a bounce off support last week because the Euro Currency Trust (FXE) fell rather sharply. Those interested in the US Dollar Fund should watch the Euro closely because it accounts for some 57% of the ETF. I am interested in the Dollar because it is negatively correlated with the stock market and commodities. Significant strength in the greenback (weakness in the Euro) would be negative for stocks and commodities. Chart 7 shows FXE in a clear uptrend since mid July. Also notice that FXE bottomed the second week of November and moved sharply higher the last few months as did the S&P 500. The six month trend remains up, but I am watching support closely because a trend reversal at this stage could have long-term consequences. Notice that FXE hit resistance in the 50-61.80% retracement zone. This is where one would expect a counter trend advance to reverse. A break below the July trend line would be negative for the trend and a break below the January low would reverse this uptrend. The indicator window shows StochRSI testing its support zone (.40-.50). A break below .40 would be bearish for momentum.
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Chart 7
