CONSUMER DISCRETIONARY SPDR LEADS MARKET HIGHER -- RETAIL SPDR CHALLENGES SUPPORT BREAK -- NUTRISYSTEM AND BEST BUY EXTEND CONSOLIDATIONS -- HOME CONSTRUCTION ISHARES SURGES OFF SUPPORT ZONE -- INTERNET ETF BOUNCES OFF SUPPORT
CONSUMER DISCRETIONARY SPDR LEADS MARKET HIGHER... Link for today's video. The Consumer Discretionary SPDR (XLY) weighed on the stock market with a sharp decline in March, but the ETF found support at a key retracement and bounced over the last three days. Chart 1 shows XLY with a higher low in early February and a higher high in early March, which is also a 52-week high. Yes, you know what I am going to say next. The bigger trend is up and this means declines are viewed as mere corrections within this uptrend. The March decline, while steep, did stop at the 62% retracement and broken resistance zone (yellow). This zone was highlighted in the Market Message on March 24th. The blue trend line and broken support marks the first resistance zone in the 65.6-65.8 area. The next step to resuming the uptrend would be a break above this zone. Note that Ford (+4.65%) and 21st Century Fox (+3.35%) led XLY higher today.
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Chart 1
RETAIL SPDR CHALLENGES SUPPORT BREAK... The Retail SPDR (XRT) is powering the Consumer Discretionary SPDR with a 1.5% gain on Tuesday. Chart 2 shows XRT breaking pennant support and moving below the mid March low last week. The ETF firmed with a small spinning top last Thursday and bounced the last three days. As with XLY, the ETF is on the verge of negating last week's support break, which turns first resistance. Even though relative weakness in retail is a concern for the broader market and the ETF formed a lower high in early March, it looks like the bigger uptrend in the stock market is countering these negatives. Before getting too positive on retail, note that historical evidence shows that the first trading day of the month has a big bullish bias. This is the day when fund managers put fresh money to work, money that was collected in the prior month. In any case, let's see some follow thru with a breakout above the resistance zone.
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Chart 2
NUTRISYSTEM AND BEST BUY EXTEND CONSOLIDATIONS... Looking through the stocks in the Retail SPDR, I came across two that may be poised for a breakout. Chart 3 shows NutriSystem (NTRI) falling to the 200-day moving average in January and bouncing off this rising moving average in early February and early March. The stock consolidated over the last three weeks and I am watching the resistance zone in the 15.6-16-2 area for a breakout.
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Chart 3
Chart 4 shows Best Buy (BBY) plunging with a massive decline on huge volume in January. This decline smacks of a selling climax because of its depth and volume. Selling quickly subsided as the stock firmed near the 62% retracement over the next few weeks. The volume-by-price indicator confirms support in the 23 area because the longest bar is in the 22-24 area. The stock got a little pop in February and then consolidated with a small triangle the last five weeks. Watch resistance at 27.5 for a breakout.
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Chart 4
HOME CONSTRUCTION ISHARES SURGES OFF SUPPORT ZONE... The Home Construction iShares (ITB) is also helping the consumer discretionary sector with a bounce on Tuesday. Chart 5 shows ITB hitting a new high in late February and then falling sharply in March. Despite this sharp decline, the overall trend is up and support looks solid. As noted in the Market Message on March 24th, support in the 23.5-24 area stems from broken resistance and the trend line zone extending up from early September. Also notice that the 50% retracement line resides at 23.42. A pullback within an uptrend is perfectly normal as long as that pullback ultimately forms a higher low. Today's bounce reinforces support in this zone and forges a higher low that almost matches the trend line zone.
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Chart 5
INTERNET ETF BOUNCES OFF SUPPORT... After taking a hard hit the prior three weeks, the Internet ETF (FDN) found support near the January-February lows and got an oversold bounce this week. Chart 6 shows FDN hitting a new high with the surge above 65 in early March. This new high did not last long as FDN fell around 10% with a decline to the 58 area. Despite a 10% fall in a short timeframe, the overall trend is up because of the new high and this decline is still considered a corrective move, not an impulse move. The ETF established support in the 58-59 area in January-February and this area held in late March. In addition to support, notice that RSI dipped below 30 for the first time since May 2012 and rebounded the last few days.
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Chart 6
EBAY AND FACEBOOK HIT FIBONACCI CLUSTERS... Google (9.91%), Amazon (7.16%), Facebook (6.33%) and Ebay (5.68%) are the top four holdings in the Internet ETF from FirstTrust. Together, these four account for over 28% of the ETF. Chart 7 shows EBAY falling in March and firming in a support zone the last few days. The stock broke resistance with a surge above 56 in late February and the broken resistance zone turned into support. Also notice that the first Fibonacci cluster is the in the 55-56 area. The 55.35 level marks a 50% retracement of the advance from early January to late February extends to 55.35, while the 55.24 level marks a 38% retracement of the advance from late November to late February. Broken resistance and the first Fibonacci cluster may the 55-56 area a logical choice for a reversal. A move above first resistance at 57 would provide the first breakout signal. Chart 8 shows Facebook (FB) firming in a support zone marked by broken resistance, the gap and the second Fibonacci cluster.
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Chart 7
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Chart 8
GOOGLE FIRMS AFTER A 10% CORRECTION... Chart 9 shows Google (GOOG) with its first 10% correction since the third quarter of 2012. This stock has been on a tear since November 2012 and almost doubled. A pullback within an uptrend can be healthy and the stock is trading just above a support zone. The January lows mark support in the 1075-1100 area. The stock firmed just above this zone with a doji on Friday and bounced on Tuesday.
