RETAIL SPDR CONSOLIDATES ABOVE RESISTANCE BREAK -- TECHNOLOGY SPDR PULLS THE POP, STOP AND DROP -- KEY BREADTH INDICATOR FOR NASDAQ 100 TURNS BEARISH, BUT REMAINS BULLISH FOR SPX -- SPOT LIGHT CRUDE REVERSES AT TRIANGLE RESISTANCE
RETAIL SPDR CONSOLIDATES ABOVE RESISTANCE BREAK... Link for todays video. Fridays employment report threw the stock market a curve ball on Friday, but the market managed to recover after a weak open. Non-farm payroll is a fairly volatile number that is subject to revision. The market will get another tests this week as the Retail SPDR (XRT) bounces off support and the retail sales report looms on Friday. With retail spending driving some two thirds of GDP, the market will likely key on this report for clues on economic growth. Chart 1 shows XRT holding up quite well with a consolidation over the last four weeks. The ETF broke above 69 to record a new high in early March and then traded flat. A small triangle or pennant is taking shape and a breakout would signal a continuation higher. Broken resistance and the recent lows mark support around 69. Notice how XRT dipped below 69 on both Thursday and Friday, and then closed above 70 on each day. The bulls are not going without a fight. The indicator window shows RSI bouncing off the 40-50 zone in late February and hitting this zone last week. Momentum is bullish as long as this zone holds. A break below 40 would turn medium-term momentum bearish. Chart 2 shows the Market Vectors Retail ETF (RTH) with the directional movement indicators.
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Chart 1
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Chart 2
TECHNOLOGY SPDR PULLS THE POP, STOP AND DROP... The Technology SPDR (XLK) appeared to get its mojo back with a surge above 30 in early March, but the ETF stalled for three weeks and then moved sharply lower last week. Despite this failed pop, the trend since mid November remains up with key support set at 29. Chart 3 shows a rising wedge defining this uptrend. Even though rising wedges are potentially bearish, chartists should respect the uptrend as long as the wedge rises. A move below 29 would break wedge support and signal a continuation of the prior decline (31 to 27). Chartists could then target a move to the support zone in the 26.5-27 area. A wedge break would also raise the specter of a large head-and-shoulders pattern extending back to early 2012. Let's cross that bridge if/when the ETF nears the November low.
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Chart 3
Chart 4 focuses on the rising wedge for the Nasdaq 100 ETF (QQQ), which trades like XLK. QQQ gapped up in early March, stalled for a few weeks and then gapped down in early April (Friday to be precise). Despite an open below support at 67.5, the ETF moved back above this key level and formed a white candlestick to affirm support. Also notice that the two trend lines confirm support in this area. It looks like a close below 67.5 is needed to consider the support break valid. The indicator window shows RSI moving into the 40-50 zone for the third time in four months. This zone held in December and February as the uptrend extended. A break below 40 would turn medium-term momentum bearish.
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Chart 4
KEY BREADTH INDICATOR FOR NASDAQ 100 TURNS BEARISH... The Nasdaq 100 %Above 50-day SMA ($NDXA50R) broke support to confirm the bearish divergence that formed from February to March. Chart 5 shows the indicator forming a lower high in March and the Nasdaq 100 forming a higher high at this time. The indicator failed to confirm the higher high in the index and this means fewer stocks participated in the February-March advance. With a break below the prior lows, the indicator is now trending lower and should be considered bearish. The odds of a wedge break for QQQ are increasing as breadth breaks down.
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Chart 5
Those looking for faster signals from this indicator can apply MACD to measure indicator momentum. In simple terms, momentum is bearish when MACD is negative and bullish when MACD is positive. Indicator momentum has been bearish since mid February. Look for MACD to break above zero to signal a positive upturn in momentum.
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Chart 6
The S&P 500 %Above 50-day SMA ($SPXA50) turned down last week, but has yet to break support for a bearish signal. Chart 6 shows the indicator forming a lower high in March and moving below 65% last week. The February low marks support at 60% and a break below this level would turn the indicator bearish. The lower indicator window shows MACD for the indicator. As noted in late March, MACD moved back into negative territory and momentum is bearish. MACD needs to break above the mid March high to turn momentum bullish again.
SPOT LIGHT CRUDE REVERSES AT TRIANGLE RESISTANCE... After a surge above $97 in late March, oil suddenly reversed in early April and erased these gains with a plunge below $93. Chart 7 shows Spot Light Crude ($WTIC) with stiff resistance in the $98 area. Resistance here stems from the January-February highs and the upper trend line of the large triangle. The noose is tightening as the triangle trend lines converge. Chartists need to watch the 2013 range for the next directional signal, which will be significant because this is a weekly chart. A move above the 2013 highs would break triangle resistance and be massively bullish for oil. A move below the February lows would break support and argue for a continuation of the 2012 decline (110 to 77.5).
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Chart 7
Oil, for the most part, is positively correlated with the stock market and negatively correlated with the Dollar. The Dollar surged from mid February to late March, but oil held up relatively well during this timeframe because the stock market remained strong. Stocks took a hit last week and this negatively affected oil. Also note that Treasuries surged after the weak jobs report. Strength in Treasuries could point to a slowing economy, which could in turn dampen demand for oil. Chart 8 shows the US Oil Fund (USO) with the early March lows marking medium-term support in the 32.2 area.
