-- MARKETCARPET TIPS AND TRICKS, 3 LEADING SECTORS, LEADING STOCKS IN LEADING SECTORS, ONE SEMICONDUCTOR ETF LAGS THE OTHER, INTEL MAKES A BREAK, TSM WEIGHS --
DRILLING DOWN INTO THE MARKETCARPET... Link for today's video. After hitting new highs in February, stocks weakened in March with selling pressure over the past week. The long-term trend for the S&P 500 remains up, but some sort of correction or pullback may be underway. Corrections are the pause that refreshes and chartists should use this situation to look for groups and stocks that show relative strength. Stocks that hold up the best during a correction are often the ones that perform the best when the correction ends. Today we will use the sector MarketCarpet to identify strong sectors and drill down to find strong stocks within these sectors.
The S&P 500 is down around 1.25% this month and this decline serves as our benchmark. Sectors and stocks down less than 1.25% show relative strength. Sectors and stocks with gains show relative strength and absolute strength. The next group of charts will show various versions of the sector MarketCarpet to identify the leaders. We are currently using a 1.25% decline in S&P 500 as the benchmark and seven days as the timeframe. If the S&P 500 is down 5% in three weeks, we can change the benchmark and timeframe accordingly. Chart 1 shows the default sector MarketCarpet. The boxes are in market-cap mode to show the largest stocks and the timeframe is two days.
(click to view a live version of this chart)
Chart 1
I am going to make three adjustments to focus on the sectors as a whole. First, hover over the MarketCarpet and right click on the mouse to see several options. Select "square mode" to make the boxes equal size and select "show ticker" to see the symbols. Next, expand the date slider to seven days by clicking and dragging the left edge. This will show price change for March (27-Feb to 9-Mar). And finally, click the up arrow at the top left so it is pointing down. This will show the sector performance as a whole.
THREE SECTORS SHOWING RELATIVE STRENGTH... Chart 2 shows the MarketCarpet in sector overview mode. The table on the right ranks eight of the nine sectors by performance (top four and bottom four). Technology, the ninth sector, is missing because it was fifth strongest or fifth weakest sector (in the middle). In any case, we are interested in the sectors showing relative strength. Finance, healthcare and consumer discretionary (cyclicals) were the top performing sectors so far this month. These three were down less than the S&P 500 and show relative strength.
(click to view a live version of this chart)
Chart 2
STOCKS SHOWING RELATIVE STRENGTH ... Now it is time to find stocks showing relative and absolute strength. From the sector level, click the down arrow to point it up and highlight the individual stocks. Chart 3 shows all 500 tickers arranged by sector. Stocks with green boxes are up for the period and showing upside leadership. These include:
Finance: SCHW, ETFC, KEY, STI and MTB
Healthcare: BMY, VRTX, MNK, DVA and REGN
Cyclicals: BBY, CBS, RCL, GM, CCL, HOT
Industrials: BA, COL, LUV, DE, SRCL
Technology: EBAY, GOOGL, NVDA and APH
(click to view a live version of this chart)
Chart 3
LEADERS IN THE FINANCE SECTOR... Chartists can focus on a single sector by hovering over that sector and double clicking on any box. Chart 4 shows the finance sector in detail. The best and worst performing stocks are shown in the table on the right. Note that Etrade (ETFC) and Schwab (SCHW), two retail oriented stockbrokers, were top performers and hit new highs last week. Four of the five worst performing stocks are REITs (WY, VTR, SPG, VNO). Rising interest rates appear to be hurting REITs and helping banks (and brokers).
(click to view a live version of this chart)
Chart 4
SMH UNDERPERFORMS SEMICONDUCTOR SPDR... The semiconductor group as a whole is strong because the Semiconductor SPDR (XSD) and MarketVectors Semiconductor ETF (SMH) hit new highs in early March. These two ETFs, however, are not created equal. XSD is a very broad-based ETF with 45 stocks and the top ten stocks account for around 30% of the ETF. SMH, on the other hand, has 25 stocks and the top ten stocks account for around 71% of the ETF. The top two, Intel and Taiwan Semi account for almost 33% of the ETF. Turn to XSD if you want exposure to semiconductor stocks overall. Turn to SMH if you want to focus on INTC and TSM, and add some exposure elsewhere.
Chart 5 shows XSD in a clear uptrend since the mid October surge. The ETF stalled the last five days and may be poised to correct, but any weakness is deemed a correction within an uptrend. First support is set at 85 and second support in the low 80s.
(click to view a live version of this chart)
Chart 5
Chart 6 shows SMH breaking out in mid February, hitting a new high and pulling back in March. Broken resistance turns first support in the 55.5-56 area. The indicator window shows SMH underperforming XSD since early December. Relative weakness in SMH is the best reason to prefer XSD.
(click to view a live version of this chart)
Chart 6
INTEL BREAKS DOWN AS TSM UNDERPERFORMS... Chart 7 shows Intel breaking down in late January, consolidating in early March and breaking down over the last two days. The triangle break signals a continuation of the prior decline and targets a move to the October low. The stock shows some serious relative weakness as the price relative moved to a multi-month low already.
(click to view a live version of this chart)
Chart 7
Chart 8 shows Taiwan Semiconductor peaking near 25 in late February and falling sharply the last two weeks. The bigger trend is still up, but this short-term decline could extend to the 22.5 area. Broken resistance and the 62% retracement mark support here. The indicator window shows the price relative (TSM:SPY ratio) forming a lower high from January to February as TSM started underperforming.
(click to view a live version of this chart)
Chart 8
WEBINAR WITH RRG... Join myself and Julius de Kempenaer of Relative Rotation Graphs (RRGs) for a Market Message Live webinar on Tuesday, March 10th, at 1PM ET. Julius and I will use a top-down approach to move from sectors to industry groups, and from industry groups to stocks. Click here to register
