DOW AND S&P 500 EXTEND UPTRENDS WITH NEW HIGHS -- XLF LEADS WITH FLAG BREAKOUT - XLK CLEARS MARCH HIGHS -- INTERNET ETF SURGES TO CHANNEL RESISTANCE -- NETWORKING ISHARES BOUNCES TO BROKEN SUPPORT -- SEMICONDUCTOR ETF NEGATES SUPPORT BREAK
DOW AND S&P 500 HIT NEW HIGHS... Link for todays video. bThe Dow Industrials and S&P 500 extended their uptrends and hit new highs on Wednesday. Fed minutes showed signs of dissent on quantitative easing and this put pressure on Treasuries and gold. This is a double-edged sword for the market. While an end to quantitative easing would pull the proverbial punch bowl, it would also suggest that the economy is strong enough to stand on its own. Note, however, that these minutes were taken before last weeks employment numbers. In any case, money moved out of Treasuries and found its way into the stock market. Chart 1 shows the Dow within a steep rising channel. The lower trend line and mid March lows mark key support just below 14400. The indicator window shows the directional movement indicators with +DI above DI. +DI moved above 30 in January and March, and DI has not been above 30 since last year. Even though +DI remains below 30 now, it is clearly stronger than DI. Chart 2 shows the S&P 500 with a rising channel and support in the 1540 area.
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
FINANCIALS LEAD WITH FLAG BREAKOUT... The Technology SPDR (XLK) and the Finance SPDR (XLF) are leading the market as both surged towards their March highs. Chart 3 shows XLF pulling back to broken resistance with a falling flag. Broken resistance turned into support as XLF surged and broke the flag trend line over the last three days. Flags are bullish continuation patterns and this breakout signals a continuation higher. Moreover, the four day surge established a reaction low to set key support at 17.75. The indicator window shows RSI bouncing off the 40-50 zone for the second time this year. A break below 40 would turn medium-term momentum bearish.
(click to view a live version of this chart)
Chart 3
(click to view a live version of this chart)
Chart 4
Chart 4 shows XLK moving sharply lower on Fridays open, but closing well above the opening low and then filling the gap early this week. The support break at 29.75 did not last long as the ETF surged above its March highs on Wednesday. With this move, XLK has yet another higher low to keep the medium-term uptrend alive. Key support is now set at 29.50. The indicator window shows RSI bouncing off the 40-50 zone in early April.
INTERNET ETF SURGES TO CHANNEL RESISTANCE... The FirstTrust Internet ETF (FDN), Networking iShares (IGN) and Market Vectors Semiconductor ETF (SMH) led the technology sector with gains exceeding 2% around midday. With sharp moves the last four days, these ETFs have erased all or most of last weeks losses. Chart 5 shows the FirstTrust Internet ETF (FDN) working its way lower with a falling channel in March. After a spike low through support, the ETF rallied and closed near its high on Friday. FDN followed this reversal with a surge to the upper trend line of the rising channel. A breakout would signal a continuation of the bigger uptrend.
(click to view a live version of this chart)
Chart 5
NETWORKING ISHARES BOUNCES TO BROKEN SUPPORT... Chart 6 shows the Networking iShares (IGN) filling last weeks gap with a big surge the last three days. This move is impressive from a percentage standpoint, but the ETF is running into a resistance zone now. IGN broke support in the 29 area and this zone turns first resistance. A break above 29.6 is needed to fully negate this support break. The indicator window shows RSI breaking its support zone and moving below 30 for the first times since October. This is a bearish breakdown and the 50-60 zone now becomes first resistance.
(click to view a live version of this chart)
Chart 6
SEMICONDUCTOR ETF NEGATES SUPPORT BREAK... Chart 7 shows the Market Vectors Semiconductor ETF (SMH) breaking support last week, but quickly firming and moving right back above the support break with a strong move the last three days. This is clearly a failed support break or bear trap. SMH broke the mid March trend line and the bulls are still in control of the medium-term trend.
(click to view a live version of this chart)
Chart 7
URANIUM-NUCLEAR ETF CHALLENGES WEDGE RESISTANCE ... Chart 8 shows the Uranium-Nuclear ETF (NLR) surging from mid November to mid January and then correcting with a falling wedge that extended into April. With a bounce above 14 this week, NLR is poised to challenge resistance from the March highs. A breakout here would signal a continuation of the November-January surge and project a move above the January high. The indicator window shows MACD moving into negative territory in late February. This momentum indicator remains just below the zero line because prices have edged lower the last few months. Look for a break into positive territory to signal an upturn in momentum.
(click to view a live version of this chart)
Chart 8
DAX AND CAC NEAR KEY SUPPORT LEVELS... The German DAX Index ($DAX) and the French CAC Index ($CAC) surged on Wednesday and successfully tested important support levels, which hold the key to their medium-term uptrends. Even though both are underperforming the S&P 500, they are still in uptrends overall. Chartists should watch these support levels because breakdowns would be negative for US equities. Chart 9 shows the DAX peaking above 8000 in mid March and working its way lower the last few weeks. The index reached its support zone this week and then surged above 7800 on Wednesday. Look for follow through above 7850 to reverse the three week slide. The indicator window shows the $DAX:$SPX ratio peaking in late December and moving lower this year. This suggests that money prefers US stocks in 2013. Chart 10 shows the French CAC Index ($CAC) with similar characteristics. Note that these are end-of-day (EOD) charts. I drew today's bar.
(click to view a live version of this chart)
Chart 9
