COPPER, MINING AND STEEL ETFS EXTEND BOUNCE -- SCTR REMAINS RELATIVELY LOW THOUGH -- FINANCE SECTOR STARTS UNDERPERFORMING -- XLF BREADTH INDICATORS TURN DOWN -- GOLD SURGES, BUT FALLS SHORT OF BREAKOUT

COPPER, MINING AND STEEL ETFS EXTEND BOUNCE - SCTRS REMAIN RELATIVELY LOW THOUGH... Link for today's video. The Copper Miners ETF (COPX), the Metals and Mining ETF (XME) and the Steel ETF (SLX) were three of the best performing industry group ETFs this week. In fact, these three of among the top performers over the past month. Despite big moves and sudden relative strength in July-August, the long-term trends remain down and more work is required to turn the tanker (long-term trend) around. Chart 1 shows COPX breaking support with a sharp decline below 9 in June. The ETF moved back above 9 with an intra-week reversal and follow through above the July high would produce the first breakout. Chart 2 shows XME within a clear downtrend since 2011. The ETF broke support earlier this year and broken support turns first resistance at 37.50 (July high). Chart 3 shows SLX breaking support in June, but moving right back above this break in July. The ETF also broke the 2013 trend line (pink) and the StockCharts Technical Rank (SCTR) broke above its March high. Even though the SCTR is still low overall, the Steel ETF shows the most technical strength of these three. You can read more about scooters (SCTR) in our ChartSchool

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Chart 1

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Chart 2

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Chart 3

FINANCE SECTOR STARTS UNDERPERFORMING ... The Finance SPDR (XLF) was one of the best performing sectors from April to late July, but has underperformed the market over the last two weeks. PerfChart 4 shows XLF with a loss over the last ten trading days (today not included). In contrast, notice that the S&P 500, Consumer Discretionary SPDR (XLY), Technology SPDR (XLK) and Industrials SPDR (XLI) are up. In fact, the other three offensive sectors are up rather sharply the last ten days.

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Chart 4

XLF BREADTH INDICATORS TURN DOWN... Chart 5 shows the Finance SPDR (XLF) with an array of breath indicators. In fact, StockCharts calculates and publishes an array of breadth indicators for the nine sector SPDRs. These include Advance-Decline Percent, Advance-Decline Volume Percent, High-Low Percent and the Bullish Percent Index. These base indicators can be used to create the AD Line, AD Volume Line and High-Low Line. You can read more on these breadth indicators in the "market indicators" section at the bottom of the technical indicators page in ChartSchool.

Even though the breadth indicators for XLF are in uptrends overall, there are signs of short-term weakness that could foreshadow a correction or consolidation period for the ETF. The top windows show the AD Line and AD Volume Line breaking below their 21-day EMAs. I used 21-days because there are approximately 21 trading days in a month. The main window shows XLF with broken resistance turning into support in the 20-20.25 area. It is possible that a falling flag is taking shape, but a break above flag resistance is needed to end the pullback.

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Chart 5

The lower windows show the 21-day EMA of High-Low Percent and the Bullish Percent Index. The high-low indicator is hovering above 10%. A downturn and break below 10% would be negative for this breadth indicator. The Finance BPI ($BPFINA) is turning down and breaking its 21-day EMA. Keep in mind that these downturns are just short-term for now. I will be watching XLF support at 20.25 and support for the high-low indicator. Support breaks in both of these would argue for a deeper correction.

GOLD SURGES, BUT FALLS SHORT OF BREAKOUT... Gold surged back above 1300 on Thursday, but the big move was not enough to reverse the four-week slide and break flag resistance. Chart 6 shows Spot Gold ($GOLD) in a long-term downtrend because it is below the 200-day EMA and this 200-day EMA is falling. Also note that gold formed a series of falling peaks and troughs over the last six months. Most recently, gold surged to 1350 in late July and then corrected with a falling flag. Even though these are bullish continuation patterns, remember that the long-term trend is down and this pattern is as yet unconfirmed. Gold moved back above 1300 on Thursday, but remains below the flag trend line and first resistance at 1325. A little follow through is needed to break flag resistance and target further strength towards the 1400 area. The indicator window shows the US Dollar Index ($USD) falling sharply in July. This decline fueled the July surge in gold. The Dollar continued lower in August, the last six days, but gold also moved lower. While the Dollar-Gold relationship is sometimes tenuous, this little disconnect warrants a watch in the coming days. Chart 7 shows the Gold SDPR (GLD) for reference.

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Chart 6

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Chart 7

NYSE BREADTH LAGS NASDAQ BREADTH ... The McClellan Summation Index measures the momentum of breadth. It all starts with the McClellan Oscillator, which is the 39-day EMA of Ratio-adjusted Net Advances less the 19-day EMA of Ratio-adjusted Net Advances (advances less declines divided by advances plus declines). Like MACD, the McClellan Oscillator fluctuates above and below the zero line as breadth momentum changes. The McClellan Summation Index is a cumulative measure of the McClellan Oscillator. The Summation Index rises when the oscillator is positive and falls when negative. This makes the Summation index slower and less sensitive than the oscillator.

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Chart 8

Chart 8 shows the Nasdaq McClellan Summation Index ($NASI) in the main window and the McClellan Oscillator in the lower indicator window. Notice how the oscillator fluctuates above and below the zero line quite often. The Summation Index, on the other hand, moved into positive territory in December 2012 and has remained positive throughout 2013. This supports the long-term uptrend in the Nasdaq. Despite a long-term positive bias, there are fluctuations above the zero line. Notice how the Summation Index moves above and below the 10-day EMA as the Nasdaq ebbs and flows within its uptrend (red and green lines). Most recently, the index moved below its 10-day EMA. This is because the oscillator has been mostly negative the last two weeks. It looks like the momentum of breadth is turning down and this downturn could foreshadow a correction in the Nasdaq.

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Chart 9

Chart 9 shows the NYSE Summation Index ($NYSI) dipping into negative territory in November and late June. The index surged with the market in July, but fell well short of its prior high and did not exceed 600. The lower high and lower absolute value suggest that NYSE breadth is not as strong as Nasdaq breadth (relative weakness). A lower high formed as the index turned down and broke its 10-day EMA. This downturn could foreshadow a correction in the market. NY Composite support is set at 9500. You can read more about the Summation Index in our ChartSchool.