GOOGLE AND PRICELINE JOIN THE FOUR-FIGURE CLUB -- GOOGLE POWERS QQQ, XLK AND FDN TO NEW HIGHS -- HOUSING STOCKS LEAD RATE SENSITIVE ETFS HIGHER -- ITB HOLDS WEDGE BREAKOUT ON WEEKLY CHART -- PERFCHART RANKS TOP TEN ITB HOLDINGS
GOOGLE AND PRICELINE JOIN THE FOUR-FIGURE CLUB... Link for today's video. With a positive earnings report stoking the bulls, Google surged over 10% and joined the thousand Dollar stock club on Friday. Actually, the club is pretty small with only Google (GOOG) and priceline.com hitting the $1000 mark today. Chart 1 shows Google holding support in the 850 area from June to October, and then surging above resistance with a massive gap. Broken resistance in the 925 area now turns into the first support area to watch should there be a pullback. The indicator window shows On Balance Volume and the Accumulation Distribution Line forming higher lows in October, which suggested that buying pressure was appearing before the breakout. Yes, I admit to using a classic "Hindsight" indicator here, but chartists can learn from this chart and apply these lessons in the future. In a nutshell, strength in volume indicators can foreshadow a successful support test. Note that these indicators still show October 17th because the volume data is incomplete for today (October 18th). Our volume indicators are updated when volume data is complete (end-of-day). Chart 2 shows priceline.com (PCLN) with the same indicators.
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Chart 1
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Chart 2
GOOGLE POWERS QQQ, XLK AND FDN TO NEW HIGHS... A 10+ percent move in Google can be felt far and wide because this stock is an important component in several ETFs. Google accounts for around 8% of the Technology SPDR (XLK), 6.58% of the Nasdaq 100 ETF (QQQ) and almost 10% of the FirstTrust Internet ETF (FDN). Needless to say, all three are up sharply on Friday and showing relative strength. Chart 3 shows QQQ hitting a new 52-week high with a surge above 80 this week. Broken resistance turns first support in the 80 area. Long-term support is set in the 75 area. Chart 4 shows XLK stair-stepping higher with a series of rising peaks and rising troughs since November 2012. Key support is set at 31. Chart 5 shows FDN also hitting a 52-week high and the SCTR hovering above 90 for several months now. All three ETFs are in clear uptrends on these charts. The only thing negative we can say is that they are short-term overbought after sharp moves the last seven trading days.
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Chart 3
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Chart 4
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Chart 5
HOUSING STOCKS LEAD RATE SENSITIVE ETFS HIGHER... The quantitative easing trade came back with a vengeance over the last few days. All of the sudden, Treasuries were moving higher, interest rates were moving lower, rate-sensitive stocks were showing leadership, the Dollar got slammed and gold surged. It also looks like the stock market gets the best of both worlds. First, the government shutdown ended and the debt-ceiling was raised, if only for a few months. Second, the mere threat of another Washington debacle early next year will surely keep quantitative easing in place for several months. QE is negative for the Dollar because it dilutes the currency. It is positive for gold because the yellow metal is a currency alternative and inflation hedge. In Thursday's Market Message, John Murphy wrote about strength in several interest rate sensitive groups, including utilities, telecoms and other high yielding stocks. PerfChart 6 shows the Dollar falling over 1% the last three days. Meanwhile, the Gold SDPR (GLD) surged 3% and the 20+ Year T-Bond ETF (TLT) advanced 2%. The S&P 500 ETF (SPY) was also up, but the four interest rate sensitive ETFs outperformed with bigger gains. In particular, notice that the Home Construction iShares (ITB) led the pack with a 4.74% gain the prior three days.
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Chart 6
ITB HOLDS WEDGE BREAKOUT ON WEEKLY CHART... Chart 7 shows ITB holding above the early September low last week and surging above 22 this week. With a breakout in play on the daily chart, chartists can now mark key support at 21. The indicator window shows the price relative turning up, but it has yet to break the mid September trend line. Chart 8 shows weekly candlesticks over the last two years. Even though ITB pulled back after the wedge breakout, this week's strength suggests that the breakout is holding and the long-term uptrend is resuming.
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Chart 7
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Chart 8
PERFCHART RANKS TOP TEN ITB HOLDINGS... Chartists can use a PerfChart to find the leaders and the laggards within the Home Construction iShares. PerfChart 9 shows the one month performance for the top ten stocks in the ETF. Notice that five are up and five are down over this period. Stocks with gains are clearly leading and showing relative strength. Stocks with losses are lagging and showing relative weakness. In particular, we can see Lennar, NVR, Ryland, Lowes and KB Home leading the group since September 17th.
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Chart 9
LENNAR, NVR AND RYLAND FORM CORRECTIVE PATTERNS... Lennar (LEN), NVR Inc (NVR) and Ryland (RYL) are especially interesting because these three show relative strength and formed corrective patterns since late September. These three show relative strength among their peers because they held above the early September low. The corrective patterns over the last four weeks look like falling flags or wedges that retraced 50-62% of the prior advance. All three broke above last week's high with big moves on Wednesday-Thursday, but a little follow through is needed to complete the flag/wedge breakouts. Stay tuned...
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Chart 10
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Chart 11
