ENERGY ETFS CONTINUE TO STRUGGLE -- GOOGLE FAILS AT BROKEN SUPPORT AND LAGS -- FACEBOOK FIRMS AFTER GAP -- INTERNET ETF MAINTAINS UPTREND -- GLOBAL SOCIAL MEDIA ETF REVERSES AT KEY RETRACEMENT -- SEMICONDUCTORS COULD HOLD THE NEXT KEY
ENERGY ETFS CONTINUE TO STRUGGLE... Link for today's video. Energy stocks are in the news today because Baker Hughes is attempting to takeover Halliburton. This seemingly positive news did not, however, boost the sector or other energy related ETFs. Perhaps the sector is more focused on oil, which fell another 1% on Monday. Chart 1 shows the Energy SPDR (XLE) bouncing with the market in October and early November with a 50% retracement. Even though XLE gained around 10% in a few weeks, the price relative continued lower and hit a new low last week. This means XLE continued to underperform. Signs of selling pressure are creeping in again as the ETF formed a dark cloud on 3-Nov and a bearish engulfing on 10-Nov. A break below support would reverse this counter-trend rally and signal a continuation of the bigger downtrend. Chart 2 shows the Oil & Gas E&P SPDR (XOP) forming a dark cloud near the 38% retracement, which marks shallower bounce. Chart 3 shows the Oil & Gas Equip & Services SPDR (XES) forming flat consolidation with the November lows marking support.
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Chart 1
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Chart 2
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Chart 3
GOOGLE FAILS AT BROKEN SUPPORT AND LAGS... The Nasdaq 100 is leading the market right now with a 52-week high last week and a 1+ percent gain month-to-date. Apple, Microsoft and Cisco are leading QQQ with new highs and nice gains in November. Google and Facebook are lagging and showing losses over the last few weeks. Chart 4 shows Google forming a massive triangle this year with lower highs in July-Sept and a higher low in October. At this point, I would say the glass is half empty (bearish) because the stock broke down in early October, broken support held and the stock shows relative weaknessm since February. GOOGL is also hitting resistance from the 50-62% retracement zone. The stock broke below the early November lows today and again shows relative weakness. Chartists can mark first resistance at last week's high.
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Chart 4
FACEBOOK FIRMS AFTER GAP ... Chart 5 shows Facebook hitting a new high in late October and then gapping down after earnings. It appears that Google's loss has been Facebook's gain over the last six months (mobile search). Even though the gap down is negative, the overall trend is clearly up and Facebook firmed right after the gap. I will be watching the post-gap range for clues on the next move. A break above the highs would be quite positive and argue for new highs. Failure to break out and a move below range support would be negative, but probably not that negative for two reasons. First, the broader market remains in an uptrend and this is positive for Facebook. Second, there is a lot of support in the 70-72 area. Notice that the Raff Regression Channel and August-October lows combine to mark support here.
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Chart 5
INTERNET ETF MAINTAINS UPTREND... Chart 6 shows the Internet ETF (FDN) for a broader look at the group. As with the market in general, FDN plunged in October and formed a sharp "V" reversal. The 21-Oct gap produced the first bullish signal and the late October gap above the September trend line produced the second. Even though the ETF is overbought after a double digit run, the immediate trend is up and I am marking support at 59. Note that the current advance is too steep for a trend line so I am using a Raff Regression Channel to define this advance. The lower line, the late October gap and the early November low combine to mark support at 59. I will stay bullish on this group as long as 59 holds. The indicator window shows the price relative (FDN:SPY ratio) firming the last few weeks and challenging a mid October high, but FDN remains an underperformer overall. A breakout is needed to signal relative strength again.
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Chart 6
GLOBAL SOCIAL MEDIA ETF REVERSES AT KEY RETRACEMENT... Chart 7 shows the Social Media Global ETF (SOCL) in an upswing since mid October, but hitting the 62% retracement and moving sharply lower on Monday. First, notice that two of the top ten stocks are Chinese internet companies (Tencent, Sina), one is Japanese (Nexon) and one is Russian (Yandex). This gives SOCL a strong Eastern influence. SOCL is down sharply today because Tencent (TCEHY), Sina (SINA) and Yandex (YNDX) are down over 2%. Nexon was down over 6% as down after the Nikkei fell around 3%. Today's reversal at the 62% retracement is the first sign of trouble. The mid October trend line and early November low combine to mark key support in the 19 area. A close below these would fully reverse the upswing and signal a continuation lower. Also notice that the ETF is underperforming the S&P 500 SPDR because the price relative peaked in August and has yet to break out to the upside.
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Chart 7
SEMICONDUCTORS COULD HOLD THE NEXT KEY... The Semiconductor SPDR (XSD) broke down in October and then came roaring back with a surge back above broken resistance. Chart 8 shows XSD consolidating in November and this ETF could hold the key to the next move for tech stocks. Notice how XSD gapped above 70 and held this gap for some two weeks with a consolidation. A move below 70 would fill the gap and break consolidation support. This would be short-term bearish for XSD and weigh on the tech sector. By adding a couple small trend lines, we can see that the consolidation over the last two weeks looks like a bull flag, which is a bullish continuation pattern. The flag, however, is currently falling and this means the short-term trend is down. A breakout at 73 is needed to end the short-term decline and continuation of the October surge. Note that XSD is a broad-based semiconductor ETF with 47 stocks that are equally weighted for the most part. Chart 9 shows the Market Vectors Semiconductor ETF (SMH) with the gap zone turning into support.
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Chart 8
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Chart 9
MICRO AND MICROCHIP FORM FLAGS AS SANDISK BREAKS OUT... The next two charts show candlestick glance charts for ten semiconductor stocks. The green lines mark the first support levels to watch for signs of weakness. In particular, I will be watching the early November low for Intel and mark support at 33. Also notice that Micron (MU) and Microchip Technology (MCHP) formed flags over the last two weeks and upside breakouts would be bullish. Sandisk (SNDK) broke flag resistance and NXPI is consolidating near the mid September highs.
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Chart 10
