WEBINAR CHARTS -- DOW DIAMONDS PLUNGES AND EW S&P 500 ETF STALLS -- LARGE-CAP TECHS LEAD THE MARKET LOWER -- WEEKLY CHARTS FOR PERSPECTIVE -- MID-CAP HIGH-LOW PERCENT LEADS -- HIGH-LOW PERCENT FOR XLY AND XLK LAGS -- OIL AND ENERGY ETFS
WEBINAR CHARTS... The major index ETFs have gone nowhere since mid November and continue to go nowhere during earnings season. For example, the S&P 500 SPDR (SPY) surged off support in the 2000 area with a 3% move last week and gave a chunk back with a decline the last three days. As we will see on the Dow SPDR chart below, the market is simply continuing its consolidation or trading range. Trading within the range is treacherous and holding individual stocks ahead of an earnings report is fraught with risk, but the major index ETFs are still consolidating after hitting new highs. A consolidation simply reflects equilibrium between buying and selling pressure. Clearly, it is hard to say when the consolidations will end and the uptrends will resume. In fact, as we saw with Intel and Microsoft today, there is no guarantee that prices will continue higher. There are no guarantees, period. Today we will look at some daily charts and then this put these consolidations into perspective with a couple of weekly charts. I will also review the key breadth indicators, look at oil and show some patterns developing in the energy-related ETFs. The live demo portion of this webinar will feature the top ten stocks in the Dow and Nasdaq 100. Click here for the Webinar recording.
DOW DIAMONDS PLUNGES BACK TO SUPPORT... Chart 1 shows the Dow SPDR (DIA) reflecting the current environment for the overall stock market. First, the big trend for stocks is up. DIA reflects this uptrend because of the breakout in late October and the new highs in November-December. Second, the stock market as a whole has been choppy over the last few months. DIA has been range bound since mid November and crossed the 176 level at least eight times. The ETF fell back from the upper trend line of the triangle with a sharp decline today, but remains within the consolidation. Broken resistance turns into the first support zone to watch in the 170-172 area.
(click to view a live version of this chart)
Chart 1
Note that the Dow Industrials ($INDU) is a price-weighted average, which means the stocks with the highest prices carry the most weight. Instead of navigating the labyrinth of the Dow Jones Indices website, I think it is easier to simply go to spdrs.com and look up the weightings for the Dow SPDR (DIA). On the chart below, note that Visa is the only stock above $200 per share and by far the biggest weighting (9.38%). Goldman Sachs, 3M and IBM are above $150 per share and account for around 18%. As the table below shows three of the top four components were down over 1% around midday, but UTX was bucking the selling pressure with a gain. The name of each stocks contains the weighting percent.
(click to view a live version of this chart)
Chart 2
EQUAL-WEIGHT S&P 500 ETF STALLS ... Chart 3 shows the Equal-Weight S&P 500 ETF (RSP) with a possible head-and-shoulders pattern since November. How concerned am I with this pattern? Not very. First, the pattern takes up 38% of the prior advance and seems too big relative to the advance it is allegedly supposed to reverse. Second, the pattern is still not that big. Even if we consider it a bearish reversal pattern, the height of the pattern is around 4 points and would project a decline to the 73 area. Third, last week's surge off support has yet to be reversed and RSP is not even close to testing support. In fact, the ETF is holding up quite well on Tuesday. While a break below the support zone would be negative, I would still consider it part of a corrective process and would expect the correction to end in the 75 area.
(click to view a live version of this chart)
Chart 3
BIG TECHS LEAD THE MARKET LOWER... Hmm...that headline is exactly the opposite of my headline on Monday. The Nasdaq 100 ETF (QQQ) showed signs of relative strength as the price relative broke out, but quickly reversed course with a sharp decline on Tuesday. Chart 4 shows QQQ reversing near the upper trend line of a falling wedge or channel. This reversal occurred with a big gap and the ETF is now in the middle of the consolidation. I still view this as a consolidation within an uptrend. It just appears that more consolidating and correcting is needed. The indicator window shows the price relative (QQQ:SPY ratio) moving back below its breakout.
(click to view a live version of this chart)
Chart 4
(click to view a live version of this chart)
Chart 5
BIG GAPS FOR INTEL AND MICROSOFT... Chart 6 shows Microsoft (MSFT) hitting a new high in November and then forming a large triangle. This pattern looked like a consolidation within an uptrend, but the stock did not break to the upside to signal a continuation higher. Instead, MSFT broke to the downside with a huge gap. The stock is now trading back near the August-October lows, which may offer some support. Actually, this gap put MSFT at a rather interesting juncture because support is at hand. Chart 7 shows Intel (INTC) gapping below the triangle trend line and negating the November breakout.
(click to view a live version of this chart)
Chart 6
(click to view a live version of this chart)
Chart 7
WEEKLY CHARTS FOR PERSPECTIVE... Today's big move does not even register on the weekly charts because the consolidations remain.
(click to view a live version of this chart)
Chart 8
(click to view a live version of this chart)
Chart 9
MID-CAP HIGH-LOW PERCENT LEADS... Chart 10 shows the High-Low Percent indicators for the S&P 500, S&P MidCap 400, S&P Small-Cap 600 and Nasdaq 100. Nasdaq 100 HiLo% ($NDXHLP) surged above 10% late last week, but fell back to 5% on Monday, which was the weakest of the four. S&P 400 HiLo% ($MIDHLP) hit 9.5% on Monday and was the strongest of the four. Overall, these indicators have been in bull mode since 22-Oct because three of the four moved above +5% then. They will remain in bull mode until three of the four move below -5%.
(click to view a live version of this chart)
Chart 10
HIGH-LOW PERCENT FOR XLY AND XLK LAGS... Chart 11 shows High-Low Percent for the nine sectors and this indicator is ranked by its 20-day EMA. The top three are unchanged with utilities, healthcare and consumer staples leading the way. The finance sector shows plenty of new highs because REITs are so strong. The technology and consumer discretionary sectors are lagging because the 20-day EMA of High-Low Percent is below 5%.
(click to view a live version of this chart)
Chart 11
OIL BREAKS ANOTHER SUPPORT LEVEL... Chart 11 shows March Light Crude (^CLH15) within a strong downtrend that is punctuated by small consolidation patterns. A consolidation within a downtrend is a bearish continuation pattern. Most recently, oil broke pennant support last week to signal another continuation lower. Oil may be oversold, but we have yet to see any signs of buying pressure. The January highs mark the first resistance zone around 50.
(click to view a live version of this chart)
Chart 12
XOP AND XES FORM CONTINUATION PATTERNS... Chart 13 shows the Oil & Gas E&P SPDR (XOP) getting an oversold bounce the last two weeks, but it looks like a bearish wedge that will ultimately fail for three reasons. First, the bigger trend is clearly down. Second, bounce retraced 50-62% of the prior decline and this is typical for a counter trend bounce. Third, a small rising wedge is like a rising flag, which is a bearish continuation pattern. The break below wedge support signals a continuation lower and projects a move to new lows in XOP. Chart 14 shows the Oil & Gas Equip & Services SPDR (XES) with similar characteristics. Chart 15 shows the Energy SPDR (XLE) with a sharper advance, but it is still a bounce within a bigger downtrend. Notice that RSI has been in its bear zone (20 to 60) since August.
(click to view a live version of this chart)
Chart 13
(click to view a live version of this chart)
Chart 14
(click to view a live version of this chart)
Chart 15
CHARTS FEATURED IN THE WEBINAR... The symbols below represent the charts that were featured in the Webinar recording. The top ten stocks for the Dow Industrials and Nasdaq 100 starts around the 25 minute mark, the Q&A charts start around the 45 minute mark and the recording ends at the 60 minute mark.
Top Ten Dow: V, GS, MMM, IBM, BA, UTX, UNH, CVX, TRV, HD
Top Ten $NDX: AAPL, MSFT, GOOG, INTC, FB, GILD, AMZN, CSCO, CMCSA
Q&A: $SILVER, WEN, $SPX, TGT, RTN, VZ, XLU
