SPY HOLDS THE GAP WITH ANOTHER NEW HIGH -- REVISITING AROON FOR MDY AND IWM -- NETWORKING ETF AND SEMICONDUCTOR SPDR BREAK WEDGE RESISTANCE -- NET NEW HIGHS SURGE YET AGAIN
SPY HOLDS THE GAP WITH ANOTHER NEW HIGH... Link for todays video. You will often here trend-followers say, "a trend in motion stays in motion". This implies that the trend extends until proven otherwise. The current uptrend in stocks is clearly a trend that is staying in motion. After a sharp decline in late February, stocks quickly found their footing and raced to new highs in March. Chart 1 shows the S&P 500 ETF (SPY) firming in the 150 area and breaking to new highs the last five days. The Raff Regression Channel defines this uptrend with the lower line marking support at 150. Note that this channel marked support just below 148 after the late February high (blue arrow). Chartists need to extend this channel when a new high is attained. Thus, the February lows and the lower channel line combine to mark a support zone in the 149-150 area. This trend is expected to stay in motion as long as the February lows hold. Traders looking for a closer support level can watch broken resistance and last week's gap, which mark support at 153. A move below 152.90 would fill the gap and raise the prospect of an exhaustion gap.
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Chart 1
The indicator window shows RSI bouncing off the 40-50 zone in late December and late February. RSI has been trading between 40 and 80 since late November and this range defines bullish momentum. A break below 40 would turn medium-term momentum bearish.
REVISITING AROON FOR MDY AND IWM... I have featured the Russell 2000 ETF (IWM) and S&P Midcap SPDR (MDY) charts with Aroon Up and Aroon Down over the last few weeks. These charts also include the Raff Regression Channel to define the trend. Chart 2 shows IWM with the gray Raff Regression Channel marking support just below 89 at the end of February. This level ultimately held and IWM moved to a new high. With a new high in March, an extension of the Raff Regression Channel was required. Support, however, did not change.
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Chart 2
I was pondering the bearish Aroon cross over the last few days and looking for a way to further quantify this indicator. In addition to Aroon Up and Aroon Down, there is also the Aroon Oscillator, which measures the difference between the two. I usually look for a surge to +50 or higher to signal the start of a new uptrend and a move to -50 or lower to signal the start of a new downtrend. This oscillator can be combined with Aroon Up and Aroon Down to insure a minimum cross before expecting a trend change. Even though Aroon Down crossed above Aroon Up last week, the Aroon Oscillator did not come close to -50. Also notice that Aroon Up did not break below 50 and Aroon Down did not reach 100. Combined with a successful test of the Raff Regression Channel, the trend is still up for IWM and the February lows mark key support. Chart 3 shows MDY with these indicators.
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Chart 3
NETWORKING ISHARES AND SEMICONDUCTOR SPDR BREAK WEDGE RESISTANCE... The Networking iShares (IGN) and the Semiconductor SPDR (XSD) are lagging the broader market because neither has yet to exceed its February high. However, both show fresh wedge breakouts that signal a continuation of the bigger uptrends. Admittedly, I have some reservations because the current advance is quite extended. IGN has been moving higher since late October and XSD has been moving higher since mid November. Nevertheless, these wedge breakouts ended the short-term pullbacks and are bullish until proven otherwise. Chart 4 shows IGN with a breakout last week. This breakout is valid as long as 29.50 holds. The February lows mark key support at 29. Chart 5 shows XSD with a wedge breakout and move above 49. A move below 47.8 would negate the breakout.
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Chart 4
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Chart 5
NET NEW HIGHS SURGE YET AGAIN... Net New Highs on the NYSE surged again in March and the cumulative Net New Highs line hit a new high. Chart 6 shows NYSE Net New Highs Percent ($NYHL:$NYTOT) in the indicator window and the cumulative line in the main window. Showing Net New Highs as a percent of total issues provides a better sense of participation. First, notice that Net New Highs have been positive since the latter part of November. Almost four months. Second, Net New Highs were positive from late June to mid November (over four months). Except for the November dip, Net New Highs have been largely positive for some eight months. In addition, the Cumulative Net New Highs line has been rising steadily since late June. This indicator lags somewhat, but it is relatively smooth and provides a good idea of the overall trend for the stock market. The trouble does not start until the cumulative line turns down and breaks below its 10-day EMA (pink line). Chart 7 shows Nasdaq Net New Highs surging in January and the cumulative line moving straight up this year.
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Chart 6
