SMALL-CAP FINANCIALS ETF RECAPTURES KEY MOVING AVERAGE -- REGIONAL BANK SPDR ATTEMPTS ANOTHER UPSWING -- STEEL ETF SURGES OFF CONSOLIDATION SUPPORT -- WORTHINGTON AND VALE REVERSE NEAR KEY RETRACEMENTS -- RETAIL SPDR CATCHES FIRE
SMALL-CAP FINANCIALS ETF RECAPTURES KEY MOVING AVERAGE... Link for today's video. Yesterday I noted that the Consumer Discretionary SPDR moved back above its short-term support break. The Finance SPDR (XLF) also joined with a surge back above 22.50 over the last few days. As with XLY, the long-term uptrend was never in jeopardy with the late July decline. Chart 1 shows XLF holding well above its rising 200-day moving average. Also note that the 50-day remains well above the 200-day. The ETF recaptured the short-term support break with a surge above 22.50 and this zone turns first support again. The early August lows mark key support in the 22 area. The indicator window shows XLF High-Low Percent ($XLFHLP) moving above +5 percent on Thursday as new highs expanded the last few days.
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Chart 1
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Chart 2
Chart 2 shows the SmallCap Financials ETF (PSCF) also making a move in August. Note that this ETF is more volatile than XLF and has underperformed XLF this year. Nevertheless, things are looking up as the ETF broke back above the 200-day and the wedge trend line. Also notice that PSCF hit a new high in early July and the wedge low held well above the mid May low. The long-term trend is up and this breakout appears to signal a continuation of this uptrend. The indicator window shows MACD moving above its signal line as momentum improves.
REGIONAL BANK SPDR ATTEMPTS ANOTHER UPSWING... Speaking of small-cap financials, chart 3 shows the Regional Bank SPDR (KRE) holding above its February-May lows and bouncing over the last two weeks. KRE has been one of the weakest industry group ETFs with a year-to-date loss around 4.5%. That compares to a year-to-date gain of 7+ percent for the S&P 500 SPDR and a gain of 5% for the Finance SPDR. On the price chart, KRE has been everywhere and nowhere this year. The ETF surged over 13% twice, but gave back these gains with subsequent declines. KRE became quite oversold with the July decline, but managed to hold above the February-May lows. With a bounce on Monday, KRE broke the July trend line and CCI moved into positive territory. This is the first sign of strength. Follow through above the late July high is the next step to watch. Chartists should also watch Treasury yields because KRE has been positively correlated with the 10-YR Treasury Yield ($TNX) this year. As chart 4 shows, KRE and $TNX tend to rise and fall together.
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Chart 3
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Chart 4
STEEL ETF SURGES OFF CONSOLIDATION SUPPORT... Steel stocks are perking up as the Steel ETF (SLX) bounces off consolidation support. Chart 5 shows SLX breaking triangle resistance in late June and hitting a new high in late July. Overall, the ETF has pretty much consolidated the last six weeks. A consolidation after an advance is typically bullish and a breakout would signal a resumption of the bigger uptrend. The indicator window shows the price relative (SLX:SPY ratio) moving higher the last two months as SLX slightly outperforms SPY. Note that SLX is packed with foreign steel stocks. Of the major US steel players, AK Steel (AKS), Nucor (NUE), Steel Dynamics (STLD) and US Steel (X) surged to 52-week highs this week. Strength in steel is also helping the Metals & Miners SPDR (XME) because the top four components come from the steel industry.
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Chart 5
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Chart 6
WORTHINGTON AND VALE REVERSE NEAR KEY RETRACEMENTS... Chart 7 shows Worthington Steel (WOR) breaking out with a big move from mid April to late June and then retracing around 62% with a decline to the 38-39 area. The stock reversed in early August, broke back above the 200-day and exceeded the late June trend line. WOR may be a bit overbought short-term, but the long-term trend is up and this breakout could have further room to run. The indicator window shows MACD moving above its signal line and approaching positive territory.
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Chart 7
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Chart 8
Chart 8 shows Vale (VALE) with a massive consolidation in 2014. Even though the February high did not reach the 15 area, I think the essence of the pattern is a inverse head-and-shoulders bottom. Regardless of the pattern, it appears that some sort of large base is taking shape in 2014 and a break above the 2014 highs would be long-term bullish. VALE caught my eye because the stock reversed near the 62% retracement this week and could be poised for another run at resistance.
RETAIL SPDR CATCHES FIRE... The Retail SPDR (XRT) is catching a strong bid on Tuesday with its second breakout in as many weeks. Chart 9 shows XRT hitting a new high in early July and retracing 62% of the prior move with a decline into late July. The new high means the big trend is up and we should treat declines as corrections within that uptrend. There was a break above 85.5 last week, but the ETF fell back below 85. Support held yet again and the ETF surged above 87 over the last two days. This move affirms the support zone and argues for further strength above the July high. The indicator window shows XRT relative to SPY. This price relative has yet to breakout because XRT is still underperforming the broader market. Chart 10 shows the MarketVectors Retail ETF (RTH) hitting a new high for 2014. Strength in retail is positive for the overall market because consumer spending drives some 2/3 of GDP.
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Chart 9
