BIG TECH SHOWS RELATIVE STRENGTH AS SMALL TECH ATTEMPTS BREAKOUT -- INTERNET ETF BREAKS OUT AS CLOUD COMPUTING ETF CHALLENGES RESISTANCE -- YAHOO! CHALLENGES RESISTANCE AS VM WARE BREAKS PENNANT
BIG TECH SHOWS RELATIVE STRENGTH AS SMALL TECH ATTEMPTS BREAKOUT ... Link for today's video. The Nasdaq 100 ETF (QQQ) continues to lead the major index ETFs with another new high. Not many ETFs are trading at or above their July highs right now. QQQ shows both chart strength and price strength (momentum) with this move to new highs over the last seven days. Chart 1 shows the ETF firming in the 94 area in early August and then breaking short-term resistance with a move above 95.5 last week. Chartists can mark key support in the 94 area.
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Chart 1
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Chart 2
Chart 2 shows the Small-Cap Technology ETF (PSCT) firming at the 50% retracement in July and advancing to resistance in August. Note that PSCT hit a new high in early July and this suggests that the July pullback was a mere correction within a bigger uptrend. A break above the resistance zone would be bullish and argue for another new high. The indicator window shows PSCT relative to the Russell 2000 iShares (IWM). Notice that small-cap tech stocks are outperforming small-caps in general. Here are the symbols for the small-cap sector ETFs: PSCD,PSCF,PSCT,PSCI,PSCH,PSCC,PSCU,PSCM,PSCE
INTERNET ETF BREAKS OUT AS CLOUD COMPUTING ETF CHALLENGES RESISTANCE... The internet and cloud computing groups are powering the technology sector in August. I featured the Internet ETF (FDN) over the last two weeks as the ETF consolidated within an uptrend and challenged resistance. Chart 3 shows the ETF breaking above the upper Bollinger Band and the triangle trend line last week. The indicator window shows the price relative rising since early May. Chartists can mark key support in the 58-59 area.
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Chart 3
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Chart 4
Chart 4 shows the Cloud Computing ETF (SKYY) advancing to triangle resistance over the last two weeks. Overall, the ETF broke out with a surge in May-June and then consolidated with the triangle. With the ETF hitting resistance near the 62% retracement in July, there was a chance that this advance was a mere correction within a bigger downtrend. A consolidation after an advance, however, is usually a bullish continuation pattern. Today's breakout, therefore, bodes well as long as it holds. Overall, there is support in the 26.25-26.50 area and the bullish bias remains as long as it holds. OTEX, NTAP, RHT, FB and EMC are leading SKYY higher.
YAHOO! CHALLENGES RESISTANCE AS VM WARE BREAKS PENNANT... Yahoo! (YHOO) is part of the Internet ETF and VM Ware (VMW) is part of the Cloud Computing ETF. Chart 5 shows Yahoo! bouncing off support in mid July and hitting the top of its four month range in late July. The stock pulled back with what looks like a small wedge or pennant. With a bounce the last three days, Yahoo! broke the upper trend line and is poised to challenge the bigger resistance zone ahead of the Alibaba road show.
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Chart 5
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Chart 6
Chart 6 shows VM Ware (VMW) breaking out with a surge in late July, consolidating with a pennant and breaking pennant resistance over the last few days. Broken resistance and the pennant lows combine to mark support in the 98 area. The indicator window shows the price relative breaking out in late July as VMW starts to outperform again.
CONSUMER DISCRETIONARY SECTOR SURGES OFF LONG-TERM SUPPORT... The Consumer Discretionary SPDR (XLY) was hit with selling pressure in late July, but firmed in early August and surged back above its short-term support break. Chart 7 shows that the long-term uptrend was never in jeopardy because the ETF held above its rising 200-day moving average. The bounce off support and last week's breakout ended the short-term pullback, which was a correction within a bigger uptrend. Notice how broken support turned into resistance and this area again turns into the first support area to watch. XLY appears headed for a new high and this is positive for the market because the consumer discretionary sector is the most economically sensitive sector. Chart 8 shows the Equal-Weight Consumer Discretionary ETF (RCD) breaking flag/wedge resistance with a surge over the last six days.
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Chart 7
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Chart 8
DISNEY AND HOME DEPOT LEAD CONSUMER DISCRETIONARY SECTOR... Chart 9 shows Disney (DIS), the largest component in XLY, breaking out last week and hitting a new high. Chart 10 shows Home Depot (HD), the fourth largest component, breaking out and hitting new highs. The run up in HD is especially interesting because the housing group is generally weak, the retail group cannot hold a bid and the stock reports earnings on Tuesday before the market open. Call Bob Barker because it is time to play truth or consequences.
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Chart 9
