MARKING KEY LEVELS FOR SPY AND QQQ BREADTH INDICATORS -- DJ AUTO INDEX FORMS LARGE CONTINUATION PATTERN -- FORD HOLDS BREAKOUT -- GM STALLS NEAR RESISTANCE -- GOLD SPDR FORMS BEARISH CONTINUATION PATTERN -- SILVER ETF STALLS NEAR WINTER LOWS
MARKING KEY LEVELS FOR SPY AND QQQ BREADTH INDICATORS... Link for today's video. The breadth indicators for the Nasdaq 100 ETF and S&P 500 SPDR hit new highs this month and have yet to break down. Small-caps may be lagging and momentum names may be down sharply over the last few months, but SPY is holding up quite well and QQQ continues to edge higher with a rising wedge. As long as these two ETFs and their respective breadth indicators hold up, the market cup is half full and the bulls still have the edge. Chart 1 shows SPY, the S&P 500 AD Line ($SPXADP) and the S&P 500 AD Volume Line ($SPXUDP) hitting new highs on May 12th. Even though SPY fell back after hitting this high, it remains above its support zone and selling pressure has been minimal. The lows extending back to late April mark key support in the 185-186 area. The indicator windows show the AD Line and AD Volume Line flattening out over the last four weeks. Flattening does not signal an increase in selling pressure. It merely means that buying pressure and selling pressure are near equilibrium. Breaks below the support zones would show an increase in selling pressure and said breaks could be used to confirm a breakdown in SPY. Until such breaks, the uptrend has yet to be proven otherwise.
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Chart 1
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Chart 2
Chart 2 shows QQQ with a rising wedge. Even though this is potentially bearish, it is currently bullish because the wedge is rising. QQQ surged above 88 in late April and then worked its way higher the last few weeks. The May lows and lower trend line combine to mark key support in the 85.5-86.5 area. The indicator windows show the Nasdaq 100 AD Line ($NDXADP) and the Nasdaq 100 AD Volume Line ($NDXUDP) flattening out over the last four weeks. Note however, that both exceeded their early March highs and show more strength than the underlying (QQQ). Chartists can use the recent lows to mark a support zone and stay bullish as long as both indicators hold support.
DJ AUTO INDEX FORMS LARGE CONTINUATION PATTERN... The DJ US Automobile Index ($DJUSAU) remains stuck in a long consolidation and I am watching closely for the next directional clue. As chart 3 shows, the prior move was up and this suggests that the consolidation is a rest within an uptrend (i.e. a bullish continuation pattern). A break above the upper trend line would signal a continuation higher and open the door to new highs. Conversely, a move below lower support would show selling pressure and argue for a retracement of the prior advance (July 2012 to August 2013). The indicator window shows weekly MACD stalling near the zero line. This is what happens when price action flattens on the price chart. Momentum oscillators, such as MACD and RSI, move towards their centerlines because prices are going nowhere. MACD is still just below its signal line and a break above this line is needed to signal an upturn in momentum.
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Chart 3
FORD HOLDS BREAKOUT ... Chart 4 shows Ford (F) breaking channel resistance at the end of March and stalling after the breakout. Overall, the stock is in a long-term uptrend after a massive double bottom and breakout in 2012. After doubling in a year, the stock was ripe for a rest and corrective period. The falling channel from October to February represents a correction and the breakout signals a continuation of the bigger uptrend. Technically, the breakout is holding and remains bullish until proven otherwise. A close below the April lows would call for a reassessment. The indicator window shows MACD turning up in late March and moving into positive territory this month. Momentum is also bullish as long as MACD holds above its signal line.
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Chart 4
GM STALLS NEAR RESISTANCE... Chart 5 shows General Motors (GM) correcting with a falling wedge over the last five months. Whereas Ford broke out and exceeded its March high, GM is lagging a bit and remains short of a convincing breakout. Perhaps recent recalls and missteps explain underperformance. Even so, GM is interesting because it would not take much to trigger a breakout and signal a continuation of the bigger uptrend. A move above 36 would do the trick. The indicator window shows MACD in negative territory and below its signal line. At the very least, a signal line cross is needed to signal an improvement in momentum.
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Chart 5
GOLD SPDR FORMS BEARISH CONTINUATION PATTERN... The Gold SPDR (GLD) has been stuck in neutral since early April as it consolidates in the 124 area, which equates to the 1300 area for Spot Gold ($GOLD). Chart 6 shows GLD falling below 124 in early April and bouncing off the 50-62% retracement zone a few times. A lower high formed in early May and a descending triangle could be taking shape now. This is a bearish continuation pattern and a break below the April lows would signal a continuation of the March decline. The May highs mark a resistance zone in the 126-127 area. A break above this zone is needed to negate the descending triangle and turn bullish on bullion. Gold needs to break 1320 to get some upside traction.
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Chart 6
SILVER ETF STALLS NEAR WINTER LOWS... The Silver ETF (SLV) fell back to the December-January lows at the end of April and then moved into a tight consolidation. Chart 7 shows SLV with the Bollinger Bands overlaid. These bands contracted in the second half of April and remain relatively narrow. Notice that the BandWidth indicator has been below 5% for most of the last five weeks. Even though this volatility contraction is occurring near support, the trend since late February is clearly down. Chartists can mark key resistance in the 19-19.25 area. A move above this level would exceed the upper band and break the late April high. Such a breakout would suggest a successful support test and reverse the 12-week downtrend.
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Chart 7
GOLD AND SILVER MINERS ETF REMAIN IN DOWNTRENDS... The Gold Miners ETF (GDX) may be firming at an interesting juncture, but the overall trend is down and selling pressure continues to dominate. Chart 8 shows GDX bouncing off the 62% retracement line in late March and mid April. The ETF is once again testing this level after a decline the last two weeks. This juncture is interesting because it represents a 62% retracement of the December-March advance and the ETF found support here twice before. The mid April bounce, however, formed a lower high and this makes a descending triangle now possible. Another bounce off support AND a break above the resistance zone are required to negate this descending triangle. The indicator window shows MACD in negative territory and below its signal line, which makes momentum clearly bearish. Chart 9 shows the Silver Miners ETF (SIL) falling below the 62% retracement with a falling wedge. The trend here is down as long as the wedge falls and chartists can mark key resistance at 13.
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Chart 8
