CONSUMER DISCRETIONARY, INDUSTRIALS AND TECHNOLOGY SPDRS HIT NEW HIGHS -- FINANCE AND REGIONAL BANKS STILL LAGGING -- RETAIL SPDR LAGS, BUT REMAINS IN UPTREND OVERALL -- INTERNET, NETWORKING AND SEMICONDUCTOR ETFS BREAK TO NEW HIGHS
CONSUMER DISCRETIONARY, INDUSTRIALS AND TECHNOLOGY SPDRS HIT NEW HIGHS... Link for today's video. Even though the finance sector is lagging the market this month, the other three offensive sectors are picking up the slack and showing relative strength. There are different ways to measure relative performance and find the leaders. Chartists can use a PerfChart to compare the gains or losses over a period of time. Chartists can compare the StockCharts Technical Rank (SCTR) or chartists can analyze the price relative (i.e. XLY:SPY ratio). Chartists can also compare price charts to see which ones are hitting new highs and which ones are falling short. This week the Consumer Discretionary SPDR (XLY), Industrials SPDR (XLI) and Technology SPDR (XLK) recorded 52-week highs, along with the S&P 500 ETF (SPY). Fresh highs affirm the uptrends and show these sectors keeping pace on a price chart basis. Chart 1 shows XLY within a rising channel since November 2011. We can debate overbought conditions or correction odds, but there is no debating the overall trend. It is up. The upper trend line marks the next upside target, which is not far away. The August low marks the first support level to watch. Further down, the July low and trend line extending up from November 2011 mark long-term support. The indicator window shows RSI with long-term support in the 40-50 zone.
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Chart 1
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Chart 2
Chart 2 shows the Industrials SPDR (XLI) in a long-term uptrend with first support just below 44. Chart 3 shows the Technology SPDR (XLK) hitting a new high this week. The November trend line and August low combine to mark support at 31. Notice that CCI moved into positive territory and stayed positive since January. Chartists can use the centerline of a momentum oscillator to define a bullish or bearish bias. RSI has a centerline at 50, MACD has a centerline at zero and StochRSI has a centerline at .50. Momentum favors the bulls when the oscillator trades in the upper half, and the bears when in the lower half. A move into negative territory would put CCI in the lower half and turn momentum bearish. Overall, chartists can watch these three sectors for clues on the market. Key support breaks from two of the three would be negative for the market overall.
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Chart 3
FINANCE AND REGIONAL BANKS STILL LAGGING... The Finance SPDR (XLF) is lagging the market because it has yet to exceed its July high and forge a 52-week high. While this is a concern, the overall trend remains up and XLF has yet to show absolute weakness with a trend reversal. Chart 4 shows XLF within a rising channel since May 2012, almost 18 months. The ETF broke flag/channel resistance with the September surge above 20, but remains just shy of a new high. Long-term, I am marking support with the August low and May trend line. A move below 19 would break both and be negative. The indicator window shows CCI holding positive since August 2012. A move below zero would turn momentum bearish.
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Chart 4
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Chart 5
I am also concerned with relative weakness in the Regional Bank SPDR (KRE), which I alluded to on Wednesday. A steep yield curve and loose monetary policy should benefit banks. The inability to bounce in the face of positive news is negative. Chart 5 shows weekly prices over the last three years. While the S&P 500 ETF trades in new high territory, KRE remains well below its summer high and failed to partake in the September surge. The ETF is now consolidating just above first support. The indicator window shows CCI moving towards the zero line, a break of which would turn momentum bearish.
RETAIL SPDR LAGS, BUT REMAINS IN UPTREND OVERALL... The Retail SPDR (XRT) is also lagging because it has yet to break above its summer highs, but I am not too concerned here because the trend is clearly up and the ETF recovered nicely after the August decline. Chart 6 shows XRT within a large rising channel since November 2011. Since moving above 75, the ETF has spent most of its time near the upper trend line, which puts it in the upper half of the channel. After a weak start the first week of September, XRT surged the last two weeks and chartists can mark support at the August low. CCI support is set at zero. I see little reason for alarm with XRT close to a new high and CCI above 100 again. Retailers are the lifeblood of the economy and this chart suggests that retail spending is fine. Chart 7 shows the Market Vectors Retail ETF (RTH) with an amazing uptrend since August 2011. Note that Wal-mart (WMT), Home Depot (HD) and Amazon (AMZN) account for around 25% of this ETF.
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Chart 6
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Chart 7
INTERNET, NETWORKING AND SEMICONDUCTOR ETFS BREAK TO NEW HIGHS... Strength in the technology sector is supported by leadership from the FirstTrust Internet ETF (FDN), Networking iShares (IGN) and Semiconductor SPDR (XSD). Software is also holding its own as Adobe (ADBE) surged to all time highs this week. Yes, Adobe exceeded its 2007 highs. In another milestone, PriceLine (PCLN) exceeded its 2000 high by breaking the $1000 barrier this week. Chart 8 shows the FirstTrust Internet ETF (FDN) breaking out in late 2012 and then accelerating higher in 2013. The August lows and November trend line mark first support in the 48-49 area. The price relative broke out to multi-year highs with a surge the last five weeks. This is one of the strongest ETFs in the technology sector. With FDN getting short-term overextended, traders might look for a pullback to the 50 area for a better entry point.
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Chart 8
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Chart 9
Chart 9 shows the Networking iShares (IGN) breaking above its 2012 highs with a surge above 31 this month. The ETF was hit hard in late August, but quickly rebounded and recouped these losses. This month's breakout argues for higher prices and chartists might target a move to the upper channel trend line over the coming months. Despite this breakout, the price relative shows IGN to be a laggard overall because this ratio (IGN:SPY) has barely bounced the last few months.
Chart 10 shows the Semiconductor SPDR (XSD) within an uptrend since November 2012. Despite an advance the last 11 months and a flag breakout this month, the ETF is barely outperforming the S&P 500 ETF (SPY). The price relative did bottom in October, but has barely risen as XSD fights to outpace the broader market. Who would have thought? In any case, the new high is bullish and chartists can mark key support in the 54 area.
