BEARISH DIVERGENCE EXTENDS IN $NDX BREADTH INDICATOR -- AMAZON, FACEBOOK AND GOOGLE, WEIGH ON THE NASDAQ -- MOMENTUM AND INTERNET STOCKS GET HAMMERED -- APPLE BUCKS THE TREND WITH RESISTANCE CHALLENGE -- XLY LAGS AND TESTS SUPPORT AS XRT FALLS
BEARISH DIVERGENCE EXTENDS IN $NDX BREADTH INDICATOR... After forming two big outside days the prior two weeks, the Nasdaq 100 ETF (QQQ) is falling on Monday and breaking its first support level. Chart 1 shows QQQ opening strong and closing weak on March 13th and 21st (red arrows). Basically, these days started with strong buying pressure, but selling pressure soon took over and drove prices lower the rest of the day. These intraday reversals produced long filled candlesticks that mark resistance just below 91. With today's decline, QQQ is breaking the support zone marked by broken resistance and prior low. Even though this is a short-term negative, the bigger trend remains up and this could be just a correction of the February surge. Broken resistance and the 62% retracement line mark the next target in the 86 area.
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Chart 1
The indicator windows show the AD Line and AD Volume Line for the Nasdaq 100. The AD Volume Line peaked on February 20th and formed a lower high in early March. With QQQ forming a higher high, a small bearish divergence formed as the indicator failed to confirm the ETF. The AD Volume Line, however, did record a higher high in early March and did not form a bearish divergence. Relative weakness in the AD Volume Line points to selling pressure in some of the volume leaders in the Nasdaq 100.
AMAZON, GOOGLE AND FACEBOOK WEIGH ON THE NASDAQ ... Chart 2 shows Amazon (AMZN) breaking down over the last four days with a sharp decline from a key retracement, which is a textbook bearish setup. The stock broke down in late January, firmed in February and then retraced 62% with an advance to the 380 area in March. Notice how the stock stalled with a high-volume spinning top near the 62% retracement and just below broken support, which turns resistance. A spinning top forms with long upper-lower shadows and a small body in the middle. Basically, the open-close range, which forms the body, was in the middle of the high-low range. This shows indecision at resistance and the subsequent support break completed the reversal. It looks as if AMZN is continuing its January decline with a target in the low 300s.
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Chart 2
Chart 3 shows Facebook (FB) falling around 10% from its early March high, which was a 52-week high. The stock formed a bearish engulfing to mark this high and fell below 65 today. Even though a falling flag may be taking shape, note that the next support zone is in the 58-61 area. Broken resistance, the gap zone and the Fibonacci cluster mark this support zone. Instead of choosing one move for the Fibonacci retracements, chartists can base Fib retracements on two moves and look for a cluster. A 62% retracement of the move from late January to early March extends to 59.65 and a 50% retracement of the advance from late November to March extends to 58.
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Chart 3
Chart 4 shows Google (GOOG) peaking in late February and falling below 1160 in March. The stock gapped above 900 in mid October and then rose with a steady advance to the 1225 area in late February. GOOG was up over 40% from its October low. The stock started underperforming the S&P 500 in late February as the price relative turned down. It looks like Google is retracing a portion of the prior advance and I am using the Fibonacci retracement tool to identify potential targets. The late January low and 38% retracement mark the first target in the low 1080s. The consolidation from late October to early November and the 50-62% retracement zone mark the next target in the 1000-1030 area.
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Chart 4
MOMENTUM AND OTHER INTERNET STOCKS GET HAMMERED ... Selling pressure is hitting the momentum stocks especially hard on Monday. The next ten CandleGlance charts show ten momentum stocks. All ten are down with declines ranging from 2 to 7 percent. Notice that Netflix (NFLX), Tesla (TSLA), LinkedIn (LNKD) and Twitter (TWTR) are among the hardest high. Such wide spread selling pressure in these momentum names suggest that the market is moving away from risk, or at least the riskiest end of the market. Chart 5 shows Chipotle Mexican Grill (CMG) falling below 600.
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Chart 5
Chart 6 shows LinkedIn (LNKD) hitting a new low. Netflix (NFLX) is falling to broken resistance in the 375 area, while Priceline (PCLN) is near broken resistance in the 1200 area.
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Chart 6
Chart 7 shows Twitter (TWTR) extending its downtrend with a move below 50 and YELP falling around 20% this month.
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Chart 7
APPLE BUCKS THE TREND WITH RESISTANCE CHALLENGE... Apple (AAPL), which has underperformed the S&P 500 since early December, is acting more like a value stock and bucking the selling pressure in momentum stocks today. Chart 8 shows AAPL breaking above the triangle trend line and challenging resistance in the 540-546 area today. Resistance here stems from the trend line zone and late March high. The indicator window shows Aroon Up (green) surging to 100 for the first time since early December. Aroon means "dawn's early light" in Sanskrit and this surge to 100 suggests that a trend change is afoot. This signal would be negated if Aroon Down (red) surges above 70.
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Chart 8
XLY LAGS AND TESTS SUPPORT AS XRT FALLS... Chart 9 shows the Consumer Discretionary SPDR (XLY) breaking first support with a sharp decline below the early March lows. The ETF filled the early March gap with a decline below 66 and then formed a pennant last week. The pennant break is short-term bearish and signals a continuation lower, possibly to the 63.5 area. This target zone stems from broken resistance and the 62% retracement. The indicator window shows the price relative forming a lower high and breaking below its early February low. Relative weakness in the most economically sensitive sector is negative for the market overall.
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Chart 9
AUTOS, HOMEBUILDERS AND RETAILERS ALSO ON XLY ... Amazon account for 6.52% of XLY and Priceline weighs in at 3.19%. Together, these two account for over 9.5% of XLY and they are clearly weighing, but weakness is more widespread. Chart 10 shows the DJ US Auto Index ($DJUSAU) failing at resistance in the 222-226 area for the fourth time and breaking the February trend line in early March. After a small bounce last week, the index stalled and broke short-term support with a sharp decline today. The indicator window shows the index underperforming the S&P 500 the last six months.
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Chart 10
Chart 11 shows the Home Construction iShares (ITB) failing to hold a spike above 25.5 last week and falling below 24 this week. ITB is down almost 10% this month and underperforming the S&P 500 the last four weeks. Despite short-term weakness, I still think the bigger trend is up and a support test is at hand. Broken resistance and the trend line zone combine to mark support in the 23.5-24 area. Also note that CCI dipped below -100 to become oversold.
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Chart 11
Chart 12 shows perhaps the most worrisome chart for the market overall. The Retail SPDR (XRT) surged in February, but failed to take out its 2012 highs and formed a lower high in early March. After a three week stall, the ETF broke short-term support with a sharp decline below 85. The indicator window shows the price relative stalling in March and then turning down with a support break this week. Retail spending accounts for some two thirds of GDP and a break down in this key group could bode ill for retail spending, which has been sluggish the last four months.
