WEBINAR CHARTS, SPY MAINTAINS CHANNEL, UTILITIES AND THE 10-YR YIELD, NON-CONFIRMATIONS IN AD LINES, HIGH-LOW INDICATORS SOFTEN, RANKING THE SECTORS

QQQ AFFIRMS SUPPORT... The charts today come from today's webinar. Not all charts, however, are featured here. See the last section of this Market Message for the symbosl and contecnt found exclusively in the webinar recording. Chart 1 shows the Nasdaq 100 ETF (QQQ) hitting support after a sharp decline last week, firming on Thursday-Friday and surging on Monday. This bounce affirms first support in the 104-105 area. A basic tenet of technical analysis is that broken resistance turns into support. This was the case in December-January and again in March. A close below 104 would break this support zone and usher in a correction or deeper pullback. The indicator window shows RSI holding above 40 twice in the last few weeks. As noted before, 40 is my bearish threshold for momentum because RSI typically ranges between 40 and 80 in an uptrend. A move below 40 would turn momentum bearish and confirm a correction in QQQ.

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Chart 1

SPY AND RSP MAINTAIN CHANNELS... It may seem as if SPY is on a road to nowhere (think Talking Heads), but chart 2 shows that the overall trend is still up with higher highs and higher lows this year. SPY first exceeded 205 in late November and last crossed below this level on Wednesday, 26-March, which is like four months later. Even though it seems as if SPY has nothing to show for four months of trading, the green lines show a rising channel and clear upward bias. The uptrend is rather choppy, but it is an upward bias as long as key support holds. The March lows and December trend line mark support in the 202.5-205 area.

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Chart 2

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Chart 3

Chart 3 shows the Equal-Weight S&P 500 ETF (RSP) within a rising channel over the last eight months. Oh wait, I forgot about the October dip to 70, which is about the most out-of-place dip I have ever seen. I know we can't really ignore this dip, but notice how steady this uptrend is without it. In addition, the dip only affects the lower trend line, not the upper, which is connected by rising highs. These rising highs indicate that buying pressure is strong enough to push prices above the prior high and higher highs are the hallmark of an uptrend. The lower line is an "internal" trend line because it cuts through the October spike. Combined with the March lows, I am marking support in the 78-79 area. The indicator window shows RSP outperforming SPY, which means the average stock in the S&P 500 is outperforming the large-cap stocks. This is a good sign because it reflects broad strength in the index.

UTILITIES ARE STILL INTERESTING... Chart 4 shows the three utilities ETFs: the Equal-weight Utilities ETF (RYU), the Utilities SPDR (XLU) and the SmallCap Utilities ETF (PSCU). This group is most interesting right now because these three ETFs hit new highs in December-January and pulled back to their rising 200-day EMAs in March. I drew a Raff Regression Channel on RYU, and falling wedges for XLU and PSCU. All three broke out with surges and fell back last week. With another bounce the last two days, RYU and XLU are back above their 200-day EMAs. PSCU held up the best last week and remained well above the 200-day EMA.

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Chart 4

WATCH THE 10-YEAR FOR CLUES ON UTILITIES ... Chart 5 shows the Utilities SPDR (XLU) firming at the lower trend line of a rising channel, which marks the long-term uptrend. Also notice that broken resistance marks support in this area and the 62% retracement marks a potential reversal area. The middle window shows the 26-week Correlation Coefficient (XLU,$TNX) below zero since June 2013. This means utilities and the 10-YR Treasury Yield move in opposite directions for the most part. A rise in XLU, therefore, is dependent on a downtrend in $TNX. The lower window shows $TNX in a clear downtrend with a series of falling peaks since early 2014. A break above 22.55 (2.55%) would reverse this downtrend. As the chart stands right now, the 10-YR Treasury Yield is in a downtrend and this is positive for XLU.

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Chart 5

NON-CONFIRMATIONS AMONG AD LINES... Breadth indicators go underneath the price action and tell us how the market engine is running, kind of like looking under the hood of a car. Also known as "internals", breadth indicators break an index or ETF down and show us the internal strength (or weakness). Many indices and ETFs are weighted by market-capitalization, which means the biggest stocks dominate. Breadth indicators, such as the AD Line and High-Low Percent, level the playing field by treating all stocks equally. For example, an advance is +1 and a decline is -1, regardless of market cap. This provides a truer picture of what is happening beneath the surface.

Chart 6 shows the AD Lines for the five major indices: S&P 1500, S&P 500, S&P Small-Cap 600, S&P MidCap 400 and Nasdaq 100. The S&P 1500 AD Line ($SUPADP) represents the market as a whole and this broad indicator hit a new high on March 20th. This new high means we do not have a bearish divergence working and points to broad strength in the current advance.

Some minor non-confirmations, however, are present when we look at the individual index AD Lines. In the same vein as Dow Theory, where the Dow Industrials and Dow Transports should confirm one another, I am seeing non-confirmations in two of the four AD Lines. Notice that the S&P 500 AD Line ($SPXADP) and Nasdaq 100 AD Line ($NDXADP) did not record new highs in the second half of March and formed lower highs. I would not call this a sign of major weakness, but it means breadth for the S&P 500 and Nasdaq 100 is lagging. Subsequent breakdowns would turn these indicators outright bearish.

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Chart 6

INDEX HIGH-LOW INDICATORS SOFTEN... High-Low Percent is a simple and straightforward indicator. For those who are unfamiliar, High-Low Percent equals new highs less new lows divided by total issues. On the face of it, High-Low Percent favors the bulls when positive and the bears when negative. Using the zero line for signals, however, will result in whipsaws so I created a bullish threshold at +5% and a bearish threshold at -5%. The indicator turns bullish with a cross above +5% and remains bullish until a cross below -5%. It then turns bearish until a counter signal with a cross back above +5%. The signals are not perfect, but they help define the overall trend.

Chart 7 shows High-Low Percent for the S&P 500, S&P MidCap 400, S&P Small-Cap 600 and Nasdaq 100. I added another level of confirmation by requiring three of the four to cross their thresholds for broad market signals (bullish or bearish). The last such signal occurred when three of the four moved above +5% on October 22nd. S&P 500 HiLo% ($SPXHLP) and S&P 400 HiLo% ($MIDHLP) moved below -5% in mid December, but S&P 600 HiLo% ($SMLHLP) and Nasdaq 100 HiLo% ($NDXHLP) held above -5% to prevent a bearish signal. I will stay bullish on this indicator group until three of the four move below -5%. Such a signal could come next week, next month or even next autumn. Hard to say. It will happen when it happens.

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Chart 7

HIGH-LOW PERCENT RANKING FOR SECTORS... Chart 8 shows High-Low Percent for the nine sectors and these sectors are ranked by the 20-day EMA of High-Low Percent. Healthcare is by far the strongest sector with +14.91%. The consumer discretionary, technology, consumer staples, finance and industrials sectors are in the second group with readings between 5.33% and 7.04%. High-Low Percent has deteriorated over the last few months and participation is weakening, but we have yet to see these indicators turn outright bearish. XLF looks especially weak because there were very few new highs on Monday. Energy and utilities are the big laggards, and the only two considered bearish by this indicator.

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Chart 8

DEMO, CHART OF INTEREST AND Q&A... Webinar Link: Click here

Demo:The demo on today's webinar shows how the count the number of days for a given period, rank a scan by Rate-of-Change and find stocks showing relative strength.

Charts of Interest: ABBV, AMAT, APD, AWI, BBBY, DOW, FINL, GILD, GOOG, GT, JCI, LNKD, LRCX, MAS, ORCL and TWTR

Q&A Charts: CVX, FB, HAL, KR, LUV and NMBL