TIMBER ETF FORMS CLASSIC CORRECTIVE PATTERN -- AEROSPACE & DEFENSE ETF BOUNCES OFF SUPPORT -- RETAIL SPDR PULLS BACK FROM NEW HIGH -- MARKETVECTORS RETAIL ETF STALLS ABOVE BREAKOUT -- DEATH-CROSS HANGS OVER THE COAL ETF
TIMBER ETF FORMS CLASSIC CORRECTIVE PATTERN ... Link for today's video. Chart 1 shows the Timber ETF (CUT) with a corrective wedge taking shape over the last few weeks. Overall, the ETF hit a new high in early March and then fell sharply into mid April. With the rebound from mid April to mid June, the ETF has basically been range bound since October. Yes, it is not the most exciting ETF out there. In any case, my eyes on are the pullback after the advance from 23.75 to 25.75. This looks corrective because a falling wedge formed and it retraced 50-62%. A move above 25.5 would trigger a breakout and signal a continuation higher. The indicator window shows MACD moving lower the last five weeks. Momentum is currently bearish and it would take a cross above the red signal line to signal an upturn in prices.
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Chart 1
AEROSPACE & DEFENSE ETF BOUNCES OFF SUPPORT... Chart 2 shows the Aerospace & Defense ETF (PPA) hitting a new high in June and correcting with a falling channel the last five weeks. The long-term trend is clearly up because the ETF hit new highs in early March and early June. In addition, PPA is above the rising 200-day moving average. Under this assumption, declines are considered corrective in nature and a resumption of the uptrend is expected at some point. That point could be near because PPA bounced off the top of its support zone over the last few days. Notice that the ETF broke the channel trend line and MACD is on the verge of breaking above its signal line. A close below 32 would negate this breakout.
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Chart 2
RETAIL SPDR PULLS BACK FROM NEW HIGH... It was an important day for retail stocks because the Commerce Department reported a .6% increase in core retail sales for June. This "core" number excludes autos, gas, building materials and food services. Despite a pretty good number, the Retail SPDR (XRT) extended its slide and is now down around 3% the last seven days. Chart 3 shows XRT breaking out in June and hitting a new high in early July. The recent pullback is sharp, but the overall uptrend remains and I will maintain a bullish bias until support is broken. At this point, I am looking for a level that will tell me the pullback has overstayed its welcome and a bigger downtrend may be starting. The February trend line and 50-62% retracement mark that support zone. A break below this level would be deemed more than just a correction and warrant a reassessment. The indicator window shows the XRT:SPY ratio moving to a new low as XRT continues to underperform SPY. Relative weakness is negative, but it has yet to translate into a break down on the price chart. Note that XRT is a broad-based ETF with over 100 stocks. The top ten stocks account for less than 12% of the ETF.
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Chart 3
MARKETVECTORS RETAIL ETF STALLS ABOVE BREAKOUT... Chart 4 shows the MarketVectors Retail ETF (RTH) breaking out in late May and stalling the last few weeks. This breakout is largely holding as broken resistance turns into support in the 59 area. The rising 200-day day moving average and the 50-day moving average also mark potential support here. I would maintain a bullish bias as long as the ETF holds this support zone. A decisive move below this support zone would break both moving averages, and prove the bullish case otherwise. The indicator window shows MACD treading water above the zero line. Momentum has a positive bias as long as this indicator is above zero. A break into negative territory would turn momentum bearish. Note that the top four components in RTH account for over 35% of the ETF. Wal-Mart (WMT) and Amazon (AMZN) are by far the two biggest holdings.
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Chart 4
DEATH-CROSS HANGS OVER THE COAL ETF... Chart 5 shows the Coal ETF (KOL) battling two key moving averages over the last six weeks and it looks like the ETF is loosing that battle. KOL had a nice surge in April with a move above its 50 and 200-day moving averages. These breakouts did not last long as KOL moved back below in late May. The ETF was largely range bound in June and established resistance at 19 with a few peaks. With a slight upward slant, this could be a rising flag/wedge and a break below support would be bearish. Signs of weakness are already appearing as the 50-day edges below the 200-day, which is a classic death-cross. The indicator window shows momentum deteriorating as MACD moves into negative territory.
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Chart 5
EURO, GOLD AND TREASURIES REACT TO YELLEN... Fed Chair Janet Yellen is generating a lot of inter-market action with her testimony before congress. I am not going to comment on her comments because market reactions could be different tomorrow. I would remind readers that I covered gold, the Euro and Treasury yields with weekly charts in the Friday's Market Message. This analysis remains valid, but I will add three daily charts below. Chart 6 shows the Euro Index ($XEU) breaking down in May and holding this support break after a decline in July. A break down in the Euro is positive for the Dollar because the Euro accounts for 57% of the Dollar Index ($USD). Chart 7 shows Spot Gold ($GOLD) falling back to its support zone with a sharp decline the last two days. A close below 1290 would negate the June breakout. Chart 8 shows the 10-YR Treasury Yield ($TNX) firming at support in the 25 area (2.5%). The trend, however, remains down and a break above 27 is needed to reverse this downtrend.
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Chart 6
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Chart 7
