LONG-TERM TIMING, SMALL-CAP BREADTH, SECTOR AD LINES, FINANCE ETFS BATTLE SUPPORT, XLI AND XLK WORK HIGHER, GOLD, OIL, DOLLAR, STOCK SETUPS, Q&A CHARTS

S&P 500 SPDR BOUNCES OFF SUPPORT ZONE... The following charts and commentary come from the webinar on Tuesday, April 7th. I am leading off with a long-term monthly chart to emphasize two things: markets trend and long-term timing is possible. While past signals are not guaranteed to work in the future, I think 52-week highs and lows are pretty good markers for the long-term trend. Chart 1 shows monthly bars for the S&P 500 over the last 16 years and 12-month price channels in the indicator window. A monthly close above the upper channel signals a 12-month high (52-week high), while a monthly close below the lower channel signals a 12-month low. This system will certainly not get you out at tops or in at bottoms, but it does a pretty good job of catching the bulk of the trend. And yes, markets do trend. The index advanced around 100% in 55 months from 2003 to 2007 and the current uptrend is at least three years old, and counting. Moving aside after a 12-month low would have saved one a lot of misery by missing the 2001-2002 bear market and the 2008 decline. As the chart stands, the long-term trend is up and the lower line of the price channel is at 1883. This means a monthly close below 1883 is needed to forge a 12-month low and suggest that a long-term downtrend is underway.

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Chart 1

SMALL-CAP BREADTH CONFIRMS RELATIVE STRENGTH... Chart 2 shows the AD Lines for the S&P 1500, S&P 500, S&P MidCap 400, S&P Small-Cap 600 and Nasdaq 100. The S&P 1500 AD Line ($SUPADP) represents the market as a whole, while the other four AD Lines represent big sections of the market. Also known as internals, breadth indicators show us what is happening below the surface. First, note that the S&P 1500 AD Line hit a new high in March and there are no signs of underlying weakness with breadth. The S&P 500 AD Line ($SPXADP) and Nasdaq 100 AD Line ($NDXADP) formed lower highs in March and continue to lag. These two AD Lines are not bearish, but they are flattening out a bit. In contrast, the S&P SmallCap AD Line ($SMLADP) and S&P MidCap AD Line ($MIDADP) forged new highs on Monday and show upside leadership. This confirms relative strength in small and mid cap stocks.

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Chart 2

HEALTHCARE AD LINE STILL THE STRONGEST ... Chart 3 shows the AD Lines for the five biggest sectors, which account for over 70% of the S&P 500 SPDR (SPY). Chartists can use sector AD Lines to determine the leading and lagging sectors, and assess broad market health. The Tech AD Line ($XLKADP) and the Industrials AD Line ($XLIADP) are correcting with downtrends over the last five to six weeks. I consider these declines as corrective because the bigger trend is up and both AD Lines hit new highs recently. The Consumer Discretionary AD Line ($XLYADP) and Finance AD Line ($XLFADP) held their mid March lows and bounced over the last few days. Watch these lows for a break down that would weight on the broader market. The HealthCare AD Line ($XLVADP) flattened the last few weeks, but held well above its mid March low and remains strong overall.

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Chart 3

UTILITIES AD LINE GOES FOR BREAKOUT... Chart 4 shows the AD Lines for the other four sectors, which account for around 25% of the S&P 500 SPDR (SPY). The Consumer Staples AD Line ($XLPADP) is the strongest overall with an uptrend and a surge the last six days. The Utilities AD Line ($XLUADP) may be ending its correction with a breakout on Monday. The Energy AD Line ($XLEADP) is getting a bounce, but this is just a bounce within a bigger downtrend. The Materials AD Line ($XLBADP) remains weak overall and barely bounced the last few days.

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Chart 4

FINANCE SPDR BATTLES SUPPORT... I am bullish the Equal-weight Finance ETF (RYF) and the Finance SPDR (XLF) right now, but am watching closely because short-term consolidation breaks could lead to medium-term support breaks. Chart 5 shows these two with sharp declines in late March and consolidations into early April (red dotted lines). Support levels are holding for now and the overall trends are still up, but a move below Monday's low would break the wedge-pennant support levels. Such a move would forecast a break below bigger support levels that extend back to the early February breakout. Overall, XLF shows relative weakness because it failed to exceed its late December high and formed a lower high in late March. This is one to watch for clues on the S&P 500.

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Chart 5

INDUSTRIALS AND TECH CORRECT... The charts for the Industrials SPDR (XLI) and Technology SPDR (XLK) pretty much sum up the current environment for the stock market overall: choppy uptrend. XLI surged in October-November and hit new highs in December and February. XLI first exceeded 56 in mid November and is currently around 56, over four months later. Despite little to show for four months of trading, the ETF sports higher highs and higher lows, which means an uptrend overall. It ain't necessarily pretty, but it is an uptrend. Chart 6 shows XLK with similar characteristics.

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Chart 6

GOLD: JUST A BOUNCE OR MORE?... Chart 7 shows Spot Gold ($GOLD) in a long-term downtrend with lower lows and lower highs since May 2013. Even though gold held the November low around 1140 and bounced the last few weeks, this bounce is still just a counter-trend move within a bigger downtrend. A double bottom is also possible, but such a pattern would not be confirmed until a break above the January high around 1300. Such a move would also break the upper trend line of the falling channel. The gray line shows the 10% zigzag to define moves of at least 10%. Notice that there have been three 10+ percent counter-trend bounces since May 2013.

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Chart 7

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Chart 8

Chart 8 shows daily bars and an upswing over the last few weeks. The green lines mark a Raff Regression Channel to define this upswing with support in the 1180 area. With the bigger trend down, I would expect resistance sooner rather than later. Notice that gold is nearing the 50-62% retracement zone and this is an area to watch for a reversal of the current upswing.

OIL: STILL STUCK IN A RANGE... Chart 9 shows Spot Crude ($WTIC) consolidating within a bigger downtrend. Oil became oversold in early January and the consolidation is working off these oversold conditions. It is possible that a double bottom is taking shape, but a break above the February high is needed for confirmation. For now, oil is stuck in a range and nearing the upper end of this range, which marks resistance. Oil needs to break above 55 and hold this breakout before thinking long-term bull.

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Chart 9

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Chart 10

Chart 10 shows daily candlesticks to focus on the swings within the trading range. Oil sprung a bear trap in mid March and moved above 50 twice in the last two weeks. The swing within the trading range is up with first support set at 48. The mid March trend line and Friday low mark support here. A close below 48 would reverse the upswing and target a test of the 2015 lows.

DOLLAR: STILL JUST A CORRECTION... Chart 11 shows the US Dollar ETF (UUP) falling back over the last four weeks, but in a clear uptrend since summer. UUP was up almost 25% from the summer lows and entitled to a pullback or correction. The Raff Regression Channel and consolidation around 25 mark the first support zone to watch here. The Euro ETF (FXE), which is 57% of UUP, is not even close to a breakout and remains in a downtrend. Ditto for the Yen ETF (FXY).

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Chart 11

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Chart 12

OTHER WEBINAR CHARTS... Here is a list of other symbols covered in the webinar on Tuesday, April 7th

Careful: earnings season is upon us.

Stock Setups: AAPL, GOOGL, IBM, PCLN, V, VZ, GS, JPM, LAZ, GE, AXL, RRD, CVT, HA, $COTTON, CORN, $BSE, $MXX, THD

Q&A: AXL, BRCM, CME, CS, FCX, FDX, ITB, QRVO, VLO, XLV