QQQ RECOVERS AFTER WEAK OPEN -- ANALOG DEVICES, BROADCOM AND INTEL LEAD SEMIS HIGHER -- XLI AND XLF STALL WITH SMALL CONTINUATION PATTERNS -- EURO ETF EXTENDS PLUNGE TOWARDS NOVEMBER LOW -- TREASURIES SURGE IN FLIGHT TO SAFETY
QQQ RECOVERS AFTER WEAK OPEN ... Link for todays video. The markets are a bit jittery on Wednesday, but US technology stocks are holding up rather well and showing some buying interest. Sharp declines in the Euro and European equities put investors on edge Wednesday. Oil was also trading lower, while the Dollar and Treasuries moved higher. Even though US stocks opened weak, they immediately firmed with the technology sector taking the lead. Chart 1 shows the Nasdaq 100 ETF (QQQ) opening at 68.25 and the moving above 68.70 in afternoon trading. The weak opening provided an excellent excuse to test support, but QQQ immediately bounced and is now closer to short-term resistance from the March highs. Overall, the medium-term trend is clearly up with the gap zone and March lows marking key support. Yes, the cup remains half full (bullish).
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Chart 1
SEMIS SHOW RELATIVE STRENGTH AS SMH BOUNCES OFF SUPPORT... The Market Vectors Semiconductor ETF (SMH) also opened weak, but quickly firmed and moved above the prior days high. Chart 2 shows SMH in an uptrend with support in the 34.50 area. The ETF firmed 4-5 days ago and then bounced on Tuesday. Todays post-open recover affirms support to keep the bigger uptrend alive. The indicator window shows RSI bouncing off the 40-50 zone, which should hold in an uptrend.
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Chart 2
ANALOG DEVICES, BROADCOM AND INTEL LEAD SEMIS HIGHER... Chart 3 shows Analog Devices (ADI) bouncing off support in the 44.5 area this week. The stock attempted a bounce last week, but fell back and re-tested support. The bounce over the last two days reinforces support from the March lows. Failure to hold the bounce and a support break would reverse the six month uptrend. Chart 4 shows Broadcom (BRCM) breaking wedge resistance in mid March and testing this breakout with a pullback to 34. The stock firmed with a harami Monday-Tuesday and bounced today. Chart 5 shows Intel (INTC) breaking flag resistance with a two-day surge. The November trend line and March low combine to mark a key support zone.
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Chart 3
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Chart 4
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Chart 5
XLI AND XLF STALL WITH SMALL CONTINUATION PATTERNS... The Industrials SPDR (XLI) and the Finance SPDR (XLF) are in clear uptrends the last five months. Even though it may seem late in the game (uptrend), both formed bullish continuation patterns over the last few weeks. Chart 6 shows XLI hitting a new high in mid March and then falling back the last two weeks. The pattern looks like a falling flag, which is a bullish continuation pattern. A move above Mondays high would break flag resistance and signal a continuation higher. XLI established short-term support with two lows at 41 this week. A break below 41 would likely negate the flag and argue for a deeper pullback. Chart 7 shows XLF with a falling flag/wedge the last two weeks. A breakout at 18.30 would signal a continuation higher. A break below support at 18 would be short-term bearish.
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Chart 6
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Chart 7
EURO ETF EXTENDS PLUNGE TOWARDS NOVEMBER LOW... The Euro extended its decline with another push lower on Wednesday. Even though EU officials backtracked on their template comments, it is hard to un-ring a bell once it has been sounded. To recap: EU officials suggested that the bail-in for Cyprus could act as a template for future deals. There are reports that uninsured deposits (>100,000) will take 40% haircuts. Thats not a haircut, mate, thats a scalping! In any case, money is moving out of the Euro and the European equity markets. Keep in mind that this money has to go somewhere and a portion may find its way into the US (Dollar, stocks, bonds and banks). Chart 8 shows the Euro Currency Trust (FXE) moving below 127 for the first time since mid November. The Raff Regression Channel defines the current downtrend with first resistance at 129. Key resistance remains at 130. Chart 9 shows the US Dollar Fund (UUP) holding support in the 22.35 area this month and surging to its highest level since mid August.
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Chart 8
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Chart 9
TREASURIES SURGE IN FLIGHT TO SAFETY... Some of the money moving out of Europe may be finding its way into the US Treasury market. Chart 10 shows the 20+ Year T-Bond ETF (TLT) bouncing in mid March and breaking above the December trend line today. The ETF has yet to break above its late February high and fully reverse the downtrend though. With TLT and SPY negatively correlated, a breakout would be bullish for Treasuries and negative for stocks. Chart 11 shows the 10-year Treasury Yield ($TNX) testing support from the late February lows. $TNX broke the December trend line and a follow through support break would argue for lower yields.
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Chart 10
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Chart 11
FRENCH, ITALIAN AND SPANISH EQUITIES LEAD EU LOWER... Stocks in Europe are getting hit again. The Athens General ($ATG) fell around 4% today and is down around 20% from its February highs. The Portuguese Stock Index ($PSI) fell around 2% today and is down over 8% from its February high. These two countries, while important, are still relatively small in Europe. The real worry surrounds Spain, Italy and, to some extent, France. Chart 12 shows the DJ Italy Stock Index ($ITDOW) breaking triangle support this week and plunging the last three days. Chart 13 shows the DJ Spain Index ($ESDOW) breaking its February lows with a sharp move lower the last two weeks. Chart 14 shows the DJ France Index ($FRDOW) testing the November trend line with a sharp decline today.
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Chart 12
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Chart 13
