WEBINAR CHARTS -- IWM AND IWC STILL HOLDING BREAKOUTS -- RSP AND SPY STALL AFTER BREAKOUTS -- SECTOR PERFORMANCE REFLECTS A MIXED MARKET -- RANKING 27 SECTORS -- QQQ AND TOP TECHS LAG -- AIRLINES CONTINUE TO LEAD
WEBINAR CHARTS ... Click here for the Webinar recording. These are the charts and commentary from Tuesday's Webinar (20-January). Trading remains quite choppy and we can see this in sector performance since early November. In fact, the stock market as a whole has gone nowhere since early November. Well, truth be told, the S&P 500 did hit a few new highs in December, but fell back in January and is back near the early November breakout. As noted in ChartWatchers this weekend, the S&P 500 is battling the 2000 area. Today's webinar will review the long-term trends for four major index ETFs and then break down the market into 27 sectors. This means nine cap-weight sectors, nine equal-weight sectors and nine small-cap sectors. The defensive sectors are leading overall, but consumer discretionary comes up fourth in the rankings. XLK and XLF are at the bottom of the rankings. I will show why techs are underperforming by highlighting five big techs with relative weakness. On the flip side, airlines continue to show relative strength and I will highlight some airline stocks. There is also 20 minutes of Q&A in today's Webinar recording.
KEY LEVELS FOR SMALL-CAP ETF AND MICRO-CAP ETF... The Russell 2000 iShares (IWM) and the Russell MicroCap iShares (IWC) have not moved much since late October, but their breakouts are still holding as consolidation take shape. Chart 1 shows IWM breaking out of the correction with a move above 115 in late October and then stalling between 112 and 120 the last three months. This consolidation reflects equilibrium between buying and selling pressure. It does not suggest an increase in selling pressure, which is required to reverse an uptrend. IWM established support in the 112-115 area and a break below 112 would call for a reassessment. Chart 2 shows the Russell MicroCap iShares with consolidation support in the 71-72 area.
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Chart 1
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Chart 2
RSP AND SPY STALL AFTER BREAKOUTS... Chart 3 shows the Equal-Weight S&P 500 ETF (RSP) with a breakout in early November, new highs in December and first support in the 77.5 area. Notice that the broken resistance area turned support. While a break below the mid December low would be negative, I would not consider it a long-term negative because the bigger trend would still be up. The rising 52-week SMA, the lower trend line of the Raff Regression Channel and the summer low mark support in the 72.5 area. Chart 4 shows SPY with first support in the 200 area and long-term support in the 190 area.
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Chart 3
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Chart 4
SECTOR PERFORMANCE REFLECTS A MIXED MARKET... Stocks have been largely flat since early November and most of the weakness can be attributed to the energy sector. The next four PerfCharts show performance since October 31st. PerfChart 5 shows the major indices with five up and two down. The S&P 500, S&P 500 Equal-Weight Index, S&P MidCap 400, Russell 2000 and Dow Industrials are up, but the S&P Small-Cap 600 and Nasdaq 100 are down. Two things to note. First, the gains and losses since early November are quite small. Thus, we have not see much change. Second, note that the S&P Small-Cap 600 and Russell 2000 are split. This tells us just how mixed the market has been since early November.
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Chart 5
PerfChart 6 shows performance for the nine sector SPDRs. The Energy SPDR (XLE) is down over 13% and the biggest decliner by far. According to Bespokeinvest.com, the energy sector accounted for 11% of the S&P 500 at the beginning of 2013 and 9.42% in October 2014. This weighting is now around 8.4%. Such shrinkage clearly weighed on the S&P 500, but the index still sports a small gain since early November. In addition, the other declining SPDRs are not down very much at all. The Finance SPDR (XLF) is down around 1%, while the Industrials SPDR (XLI) and Materials SPDR (XLB) are down less than a 1/2%. The three defensive sectors are leading with the Utilities SPDR (XLU) sporting the biggest gain. Also of note, the Consumer Discretionary SPDR (XLY) is the fourth best sector with a 2+ percent gain.
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Chart 6
PerfChart 7 shows the performance for the Equal-Weight S&P 500 ETF (RSP) and the nine equal-weight sector ETFs. In contrast to the cap-weighted SPDRs, these equal-weight sector ETFs tell us what is happening with the "average" stock. The energy sector is still the weakest by far, but only one other sector is down (Equal-weight Industrials ETF (RGI)). The equal-weight defensive sectors are leading and the Equal-Weight Consumer Discretionary ETF (RCD) is the fourth strongest.
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Chart 7
PerfChart 8 shows performance for the small-cap sector ETFs. This group is more mixed than the SPDRs and the equal-weight sectors. The SmallCap Consumer Discretionary ETF (PSCD) is the best performing sector with a 6+ percent gain. The SmallCap Materials ETF (PSCM) is the second weakest sector with a 9% decline.
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Chart 8
RANKING 21 SECTORS... Using the SPDRs, equal-weight sectors and small-cap sectors, we have 27 total sectors to rank. This may seem like a lot, but we can place all the symbols in an RRG chart to view the rotations. Chart 9 shows an RRG charts with 21 sectors because I left out materials and energy, which are by far the weakest. In fact, these two account for most of the selling pressure in the major index ETFs over the last few months.
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Chart 9
Admittedly, it is a bit difficult to make heads or tails of the RRG chart with 21 lines. There is, however, a table below each RRG chart that ranks the sectors for us. Chart 10 shows healthcare, consumer staples and utilities dominating the top 10 list (three from each group). The SmallCap Consumer Discretionary ETF (PSCD) managed to make the top ten with a fourth place finish. Overall, the sector leadership reflects a defensive market. Perhaps the money moving out of energy found its way into these sectors. On the negative side, the Finance SPDR (XLF) and Technology SPDR (XLK) are the weakest of the 21 sectors. This is a negative for the S&P 500 SPDR because it is a cap-weighted ETF as well. Relative weakness in these two key sectors could weigh on the broader market.
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Chart 10
QQQ AND FIVE TOP TECHS LAG...
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AIRLINES AND AIR FREIGHT CONTINUE TO LEAD...
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Chart 20
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Chart 21
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Chart 22
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Chart 23
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Chart 24
CREATING AD LINES AND HIGH-LOW LINES... I often get asked how to create an AD Line or a High-Low Line. The AD Line is a cumulative measure of AD Percent, which is advances less declines divided by total issues. The High-Low Line is a cumulative measure of High-Low Percent, which is new highs less new lows divided by total issues. After entering the symbol for the SharpChart, StockChart users can create cumulative indicators by going to the "Chart Attributes" section and setting the "Type" as "Cumulative".
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The chart above shows the S&P 1500 AD Line ($SUPADP) in the main window. The main plot is a gray line and I added a 1-period SMA as black dots. You can see the setting window below the chart. There are also four other AD Lines in the indicator windows. Note that Extra members can have up to six symbols on one chart and PRO members can have up to ten symbols on one chart. I added the other AD Lines using "Price" as an indicator and "Cumulative" as "Style". Also notice that I added pink 10-perid EMAs using the advanced indicator function. Chartists can create a High-Low Line by substituting AD Percent for High-Low Percent ($SUPHLP).
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Chart 26
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Chart 27
The image below shows a sample search for our breadth indicators. Using "and" in the search string means the subsequent term is required.
