S&P 500 BREAKS KEY MOVING AVERAGE -- GOOGLE BREAKS DOWN AS APPLE HOLDS STRONG -- PLAYING THE SWINGS IN KRE AND IWC -- DECEMBER NATURAL GAS TESTS KEY LEVEL -- ENERGY-RELATED ETFS ARE THE MOST OVERSOLD -- COFFEE ETF CHALLENGES PRIOR HIGH
S&P 500 BREAKS KEY MOVING AVERAGE ... Link for today's video. The S&P 500 is not in uncharted territory, but it is in territory we have not seen in some time. Chart 1 shows the index breaking below its 200-day moving average, breaking its prior trough and RSI reaching its lowest level since November 2012. The index also broke its 200-day moving average in November 2012. At this point, the breaks are bearish until proven otherwise. Broken support and the 200-day moving average become the first resistance levels to watch. A close back above 1913 is needed to reassess this support break and argue for a bear trap.
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
Chart 2 shows the Nasdaq 100 breaking its July-August lows on Monday. The index firmed on Tuesday, but the break is largely holding for now. At this point, I would mark first resistance at 3900 and reassess if the index surges back above this level. As long as this support break holds, the next target is the 3700-3750 area. Broken resistance and the 50-62% retracement zone mark support here. Also notice that the rising 200-day moving average is at 3763.
GOOGLE BREAKS DOWN AS APPLE HOLDS STRONG... Several stocks and groups within the tech sector broke down over the last two weeks, and a few held up. Chart 3 shows Google (GOOGL) breaking down with a sharp decline below 580 this month. The early October highs can be used to mark resistance in the 590 area. The indicator window shows Google relative to the S&P 500 SPDR. Notice that Google has been underperforming since late July. Relative strength in a break down bode ill for this tech titan.
(click to view a live version of this chart)
Chart 3
(click to view a live version of this chart)
Chart 4
Chart 4 shows Apple (AAPL) holding strong over the last six weeks. The stock hit a new high in late August and then formed a triangle consolidation. Note that volatility is contracting as the Bollinger Bands narrow. A break above 102.5 would be bullish and a break below 97.5 would be bearish here. The indicator window shows the price relative moving to a new high this week as Apple continues to outperform SPY. Apple is one of the last big techs standing and a break down in this stock would be very negative for the market.
PLAYING THE SWINGS IN KRE AND IWC... The Regional Bank SPDR (KRE) has been everywhere and nowhere this year. Chart 5 shows KRE ranging from 36.5 to 42.5 this year and crossing the midpoint of this range as least six times. Looking at the pattern since February, one could make the case for a large descending triangle, which is bearish. A break below support would confirm the pattern and project further weakness. As long as support holds, the swings are in play and chartists can use the Commodity Channel Index (CCI) for timing. A bullish upswing triggers with a move from oversold territory (-100) to positive territory (above zero). A bearish downswing triggers with a move from overbought territory (+100) to negative territory (below zero). The current swing is down with the move below zero in late September. CCI is just now coming out of oversold territory and needs to clear the zero line to turn bullish again. Chart 6 shows the Russell MicroCap iShares (IWC) with similar characteristics.
(click to view a live version of this chart)
Chart 5
(click to view a live version of this chart)
Chart 6
DECEMBER NATURAL GAS TESTS KEY LEVEL... Oil and other commodities moved sharply lower from late July to early October, but NatGas held in a trading range. Will NatGas continue to hold up or will it follow the others? I think it will move lower for two reasons. First, the general trend for commodities is down. Second, the chart shows a bearish continuation pattern taking shape. Chart 7 shows December Natural Gas (^NGZ14) breaking a big support zone in early July and falling to the 3.9 area. The contract then embarked on a trading range with a slight rise, which looks like a rising flag. These are bearish continuation patterns and a break below 3.9 would signal a continuation lower. The indicator window shows the Natural Gas ETF (UNG) testing support.
(click to view a live version of this chart)
Chart 7
ENERGY-RELATED ETFS ARE THE MOST OVERSOLD ... There is oversold and then there is OVERSOLD. Chart 8 shows the Oil & Gas Equipment & Services SPDR (XES) with weekly bars over the last three years. These settings are required to put the current rout into perspective. XES fell over 30% in four months and wiped out the gains from 2013 and 2014. The ETF overshot the 62% retracement, blew through a support zone and 10-week RSI moved below 15. These are all bearish developments from a long-term perspective. Shorter term, XES is very oversold and ripe for an oversold bounce. Broken support turns first resistance in the 39-40 area. Be careful though. This is the same ETF that fell from 50 to 15 in 2008. Chart 9 shows the Oil & Gas E&P SPDR (XOP) falling over 30% and RSI moving below 20. This ETF is also very oversold and broken support turns first resistance in the 55 area.
(click to view a live version of this chart)
Chart 8
(click to view a live version of this chart)
Chart 9
COFFEE ETF CHALLENGES PRIOR HIGH... Chart 10 shows December Coffee (^KCZ14) breaking triangle resistance with a big surge over the last few weeks. I featured the Coffee ETF (JO) in the Market Message in August and in Art's Charts in September. This triangle represents a large consolidation and the breakout clears the way to new highs. The broken resistance zone turns into the first support zone to watch in the 2.05-2.10 area. A move back below 2.00 would call for a reassessment of the breakout. The September low mark long-term support in the 1.75-1.80 area. Chart 11 shows weekly prices for JO and the MACD Histogram turning positive over the last two weeks.
(click to view a live version of this chart)
Chart 10
