-- FIRST SUPPORT FOR QQQ, MICROSOFT HITS RESISTANCE, BANDS CONTRACT FOR ORACLE, GOOGLE LEADS, SMALL-CAP BREADTH LAGS, UTILITIES BREADTH TURNS BEARISH, SECTOR SCTR RANKINGS AND CORRELATIONS --
WEBINAR CHARTS AND LINKS... Today's Webinar will start with a live demo showing how to find signals on PerfCharts. I will start with the major stock indices, drill down into the sectors and then look at twenty industry group ETFs in two separate PerfCharts. Even though there are lots of lines on these PerfCharts, chartists can highlight an individual line and easily find the winner. I will then turn to the Nasdaq 100 ETF (QQQ) and look at three key stocks: Microsoft, Oracle and Google. An overview of index and sector breadth will follow, and the Webinar will close by looking at some leading groups and stocks with interesting setups. Click here for the Webinar
MARKING FIRST SUPPORT FOR QQQ... Chart 1 shows the Nasdaq 100 ETF (QQQ) breaking out to new highs in February. The ETF became short-term overbought after a ~9 percent run the last five weeks and could be ripe for a corrective period. The highs from late November to mid January mark a resistance zone in the 104-106 area. A classic tenet of technical analysis is that broken resistance turns into support. I am, therefore, setting first support in the 104-106 area. This is the zone to watch on a pullback.

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Chart 1
MICROSOFT AND ORACLE LAG... Chart 2 shows Microsoft (MSFT) not looking so hot. The stock broke down in late January with a massive gap and then retraced around 50% of the prior decline with a bounce above 44. The gap and support break are turning into resistance as the stock turns down over the last two days.

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Chart 2
Chart 3 shows Oracle (ORCL) at an inflection point. The stock broke out in mid December, fell back with a falling channel and almost broke out in mid February. The breakout attempt stalled as the stock moved into a tight consolidation. I overlaid the Bollinger Bands to show this volatility contraction. Watch 44.5 for an upside breakout and 43 for a downside break.

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Chart 3
GOOGLE LEADS... Chart 4 shows Google (GOOGL) firming in the 500 area with lows in December and January. The pattern looks like a double bottom and the breakout targets a move to the 595-600 area. Broken resistance turns first support to watch on a throwback.

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Chart 4
INDEX HIGH-LOW PERCENT REMAINS BULLISH... Chart 5 shows High-Low Percent for the three S&P indices and the Nasdaq 100. A move above +5% is bullish and remains bullish until a counter signal with a move below -5%. The broad market is bullish when three of the four are on bullish signals and bearish when three of the four are on bearish signals. A broad market bullish signal triggered on October 22nd and remains in force. Note that Nasdaq 100 HiLo% ($NDXHLP) is the strongest of the four, followed by S&P 500 HiLo% ($SPXHLP). This means S&P 400 HiLo% ($MIDHLP) and S&P 600 HiLo% ($SMLHLP) are lagging. Note that Small-cap High-Low Percent has not been above +10% since late December. Small-cap breadth is indeed lagging, but it has yet to turn bearish, or even negative. Three of these four indicators would have to break below -5% for me to consider turning bearish on the broader market.

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Chart 5
BREADTH INDICATOR TURNS BEARISH FOR XLU... Note that the following charts were created with a StockCharts PRO account, which means chartists can have up to ten different symbols on one chart. Chart 6 shows High-Low Percent for the S&P 500 and nine sectors. The pink lines are the 10-day EMA for High-Low Percent and the sectors are ranked by this indicator. Technology HiLo% ($XLKHLP) and Materials HiLo% ($XLBHLP) are the strongest. Energy HiLo% ($XLEHLP) and Utilities HiLo% ($XLUHLP) are the weakest. In fact, High-Low Percent for XLU turned bearish for the first time since November 2013. This indicator turns bearish with a move below -5% and remains bearish until a move above +5%. A whipsaw is possible, but the indicator is bearish until proven otherwise. Elsewhere, Finance HiLo% ($XLFHLP) is not very strong because the sector is not producing very many new highs.

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Chart 6
CONSUMER DISCRETIONARY AND TECH LEAD SCTRS... Chart 7 shows the StockCharts Technical Rank (SCTR) for the nine equal-weight sector ETFs. I am using the equal-weight sector ETFs because I think they provide a better representation for the sector as a whole. The sector SPDRs, in contrast, are weighted by market cap and reflect large-cap performance. The four leaders may not be ideal for a bull market, but I am not going to quibble with relative strength in the consumer discretionary and the technology sector (the two leaders). Healthcare gets third place and materials comes in fourth. As with the High-Low Percent rankings, the finance sector is near the bottom (sixth place). It is still showing more relative strength than relative weakness though. Keep in mind that a move above 60 shows relative strength and this signal remains in force until a move below 40. Note that the SCTR for the Equal-weight Utilities ETF (RYU) moved below 40 this week and is now a clear laggard. Utilities and energy are the two sectors to avoid right now. Finance is not looking that hot either.

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Chart 7
THE LEAST CORRELATED SECTOR... Chart 8 shows the S&P 500 SPDR in the first window and the correlation for the nine sectors in the other windows. This is a weekly chart going back three years and the windows are sorted by the 26-week SMA (pink line). Notice that the Technology SPDR (XLK), Consumer Discretionary SPDR (XLY) and Finance SPDR (XLF) have strong positive correlations with SPY. All three are above 90. Of the nine, I would say the finance sector has the strongest correlation because the Correlation Coefficient (SPY,XLF) has not dipped below .75 in the last three years. The finance sector, therefore, should be watched for clues on the broader market. The Utilities SPDR (XLU) has the weakest correlation because the Correlation Coefficient (SPY,XLU) dipped below zero three times in the last three years. The breakdown in utilities this year should not be viewed as a negative for the stock market. Watch finance instead.

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Chart 8
WEBINAR EXTRAS... The following demo and charts can be seen on the Webinar.
Live Demo: Finding Performance Breakouts with PerfCharts
Additional charts: Semis (XSD, AMAT, LRCX), Defense (PPA, CUB), Retail (XRT, OSTK, RH, GPS), Homebuilding (ITB, USG), Healthcare (XLV, TEVA, MRK, BMY).
Q&A Charts: AXP, BABA, CREE, DFS, FB, MA, PG, TSLA, V, XBI.
Click here for the Webinar