NASDAQ TURNS DULL AS BOLLINGER BANDS CONTRACT -- INTUIT LEADS SOFTWARE ETF HIGHER -- F5 LEADS NETWORKING ISHARES ABOVE FIRST RESISTANCE -- INTERNET ETF FIRMS AS GOOGLE BOUNCES OFF KEY MOVING AVERAGE -- ALTERA LEADS SEMICONDUCTOR SPDR WITH A GAP-BREAKOUT
NASDAQ TURNS DULL AS BOLLINGER BANDS CONTRACT ... Link for today's video. The Technology SPDR (XLK) held up much better than the Nasdaq over the last few months and the performance contrast is quite stark. Chart 1 shows XLK challenging its early April high, while chart 2 shows the Nasdaq testing support from the February-April lows. One is near its spring high, while the other is closer to its spring lows. Weakness in the Nasdaq can be attributed to small-caps and momentum stocks, which got hammered from early March to mid April.
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Chart 1
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Chart 2
Even though the Nasdaq is underperforming, the index is getting interesting because the bigger trend is up and the Bollinger Bands have narrowed. Keep in mind that the Nasdaq hit a new high in early March and has yet to break its February low. The index tested this low in mid April, but ultimately held with a bounce back above 4000. The Nasdaq has since consolidated and volatility has contracted, which means the index may be setting up for a volatility expansion. Notice that the BandWidth indicator moved to 3% and is at the low end of its eight month range. The Nasdaq itself is stuck between support in the 4000-4050 area and resistance in the 4150-4180 area. Chartists should watch these two zones for the next breakout signal.
INTUIT LEADS SOFTWARE ISHARES HIGHER... For more clues on Nasdaq direction, chartists can divide the index into different industry groups using ETFs: the Internet ETF, the Networking iShares, the Semiconductor SPDR, the Software iShares and the Nasdaq Biotech iShares. These industry-group ETFs trended lower the last few months, but some are making breakout attempts that could turn the tide for the Nasdaq.
Chart 3 shows the Software iShares (IGV) firming in the 77-78 area over the last six weeks and going for a breakout with a 1+ percent surge early Monday. Notice how the ETF dipped below 78 three times and then bounced back after each dip. A move above resistance at 81 would break the March trend line and exceed key resistance. Within this group, chart 4 shows Intuit (INTU) bouncing off support in the 74 area and surging towards resistance in the 77 area.
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Chart 3
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Chart 4
F5 LEADS NETWORKING ISHARES ABOVE FIRST RESISTANCE... Chart 5 shows the Networking iShares (IGN) firming in the 50-62% retracement zone and surging above resistance in the 33.5 area today. Don't forget that IGN hit a 52 week high less than two months ago and remains in a long-term uptrend. The decline from mid March to mid May looks like a correction because it retraced a normal amount and formed a falling wedge. Within networking, chart 6 shows F5 Networks (FFIV) correcting back to the 100 area, firming and surging for the second Monday in a row. A channel breakout would end the correction and signal a continuation of the November-February advance.
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Chart 5
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Chart 6
INTERNET ETF FIRMS AS GOOGLE BOUNCES OFF KEY MOVING AVERAGE... Chart 7 shows the Internet ETF (FDN) trying to firm in the 52-56 area over the last three weeks. Notice the long lower shadows since late April. These lower shadows mark the intraday lows and indicate that FDN closed above its low on those days. Firmness is one thing, however, and a trend reversal is another. Look for a move above 56 to break the March trend line and exceed key resistance. Chart 8 shows Google (GOOGL) firming at the rising 200-day moving average over the last few weeks. Also notice that the stock retraced a little over 50% of the prior advance (October to March). A break above the May highs would reverse the eleven week downtrend.
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Chart 7
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Chart 8
ALTERA LEADS SEMICONDUCTOR SPDR WITH A GAP-BREAKOUT... Chart 9 shows the Semiconductor SPDR (XSD) with the shallowest decline of the five. Instead of a deep pullback that retraced a big portion of the prior advance, XSD corrected with a relatively flat wedge. After hitting a new high in early April, the ETF fell back to the 65 area and bounced off support today. A break above the May highs is needed to reverse this wedge. Chart 10 shows Altera (ALTR) with the deep decline from mid March to early May. Despite this fall, the stock did manage to hold above the prior lows and firmed in May. ALTR broke out today with a gap above 33.
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Chart 9
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Chart 10
BIOTECH ISHARES CHALLENGES RESISTANCE AS AMGEN FIRMS... Chart 11 shows the Nasdaq Biotech iShares (IBB) bouncing off a support zone in mid April and consolidating the last few weeks. A triangle has formed as the consolidation narrowed. Resistance in the 235 area is clear with several highs here since late April. An upside breakout would end the consolidation and argue for higher prices. Chart 12 shows Amgen (AMGN) firming in a support zone from the November-December lows. A move above consolidation resistance would be bullish and reinforce support.
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Chart 11
