WEBINAR CHARTS, 3 LEADING SECTORS, COPPER TURNS BACK, BASE METALS WEIGH ON XME, GOLD BACKS OFF RETRACEMENT, GOLD MINER AD LINE WARNS, OIL EXTENDS TO RANGE RESISTANCE, UTILITIES AND BONDS BOUNCE, STOCKS OF INTEREST
WEBINAR CHARTS AND NOTES... The following charts come from the Webinar on Tuesday, April 14th, featuring myself and Julius de Kempenaer of Relative Rotation Graphs (RRGs). Julius used a top-down analytical approach by starting with the big sectors, drilling down into the industry groups and then highlighting interesting stocks in these groups. Chart 1 shows a sector RRG with XLY, XLK and XLV leading. I followed with chart analysis for some the related industry groups and stocks. Not all webinar charts are shown in this commentary. Please view the webinar for details on the Relative Rotation Graphs and the individual stocks. Stocks covered include: ABBV, BAX, DVA, HCA, UHS, PFE, MRK, EXPE and APH. This video will be posted later today in the the webinar recording.
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Chart 1
CONSUMER DISCRETIONARY, HEALTHCARE AND TECH LEAD... Chart 2 shows the Consumer Discretionary SPDR (XLY) surging to new highs in February and hitting another new high in late March. The big trend is clearly up here, but the ETF moved into a trading range the last five weeks. At this point I am treating it as a correction within an uptrend, which means this is a rest within the uptrend. The March lows mark first support in the 74 area. While a break below this level would be negative, I would not consider it long-term bearish. A support break would just argue for a correction within the uptrend. The indicator window shows Aroon Down (red) moving above Aroon Up (green) for the second time in four weeks. This reflects the current consolidation as prices move sideways, but it is not bearish yet. Aroon Down needs to hit the 100 level for this indicator pair to turn bearish.
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Chart 2
Chart 3 shows the Technology SPDR (XLK) hitting new highs in February and then correcting into April. Relative to XLY, XLK shows some chart weakness because it declined with a falling wedge and XLY traded flat. The wedge, however, is still viewed as a correction within a bigger uptrend. The ETF was turned back at the upper trend line with a decline today and chartists can mark resistance with Monday's high. The indicator window shows Aroon Down surging above Aroon Up and hitting 100 to turn bearish in late March.
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Chart 3
Chart 4 shows the HealthCare SPDR (XLV) with the strongest price chart of the three. First, notice that the ETF surged in October-November and then continued higher with a rising channel. Broken resistance, the March lows and the December trend line mark support in the 70-71 area. The indicator window shows Aroon Up moving above Aroon Down in late October and hitting 100 to turn bullish. Despite a couple of negative crosses, Aroon Down never hit 100 to reverse this signal. This is the longest Aroon uptrend of the three.
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Chart 4
COPPER TURNS BACK NEAR BROKEN SUPPORT... Chart 5 shows Spot Copper ($COPPER) in a long-term downtrend and potentially reversing in the 50-62% retracement zone. Notice that copper broke support around 2.95 in November and held this support break. After hitting a 5-year low in January, copper rebounded with a move back to the 2.90 area. This was a big move in percentage terms, but still just a counter-trend bounce. With a peak in late March and decline in April, the downtrend could be re-exerting itself. A move below 2.60 would break the late January trend line and signal a continuation of the bigger downtrend. The indicator window shows the Copper ETN (JJC) for reference. Chart 6 shows Spot Palladium (PALL) breaking down in September, rebounding into early March and breaking down again in late March. Note that aluminum hit a 52-week low this month.
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Chart 5
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Chart 6
METALS, MINING AND CORRELATION... Chart 7 shows the Base Metals ETF (DBB) in a big downtrend since the September support break. The ETF surged to 15.75 in late March, but this proved to be a one-day wonder rally and the ETF fell back below 15.50 the very next day. I will leave a big resistance zone in the 15.50-16.00 area for now. The indicator window shows the 60-day Correlation Coefficient (XME,DBB) in positive territory since early July. This means base metals and the Metals & Mining SPDR are moving in the same direction. Don't expect a trend reversal in XME until we see one in DBB.
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Chart 7
DOWNTRENDS IN METALS-MINING AND STEEL ETFS... Chinese and Hong Kong stocks have gone wild recently, but Asian strength did not lift the Metals & Mining SPDR (XME) or the Steel ETF (SLX). Perhaps the rise in Chinese stocks is more of a liquidity event, and not related to the economy. Chart 8 shows XME within a clear downtrend since the September break down. The ETF managed to retrace 38.2% with bounces into November and February, but moved to new lows after each bounce. The current bounce is perhaps the weakest of the three because it looks like a mere consolidation. A break below pennant support would open the door to new lows (again). Chart 9 shows the Steel ETF within a clear downtrend as well. The ETF could be forming an inverse cup-with-handle pattern and a break below the February-March lows would target further weakness to the mid 20s.
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Chart 8
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Chart 9
GOLD REVERSES NEAR KEY RETRACEMENT ... Chart 10 shows Spot Gold ($GOLD) getting a bounce off the 1140 level in mid March and hitting resistance in the 1220 area twice now. I think the long-term trend for gold is down because of the 52-week low in November. Even though the surge to 1300 looked impressive, gold gave it all back with a decline back to the November lows and the current bounce only managed to retrace 50% of the prior decline. At this point, the immediate trend is up, but this is a counter-trend move. A break below support in the 1180 area would signal a resumption of the bigger downtrend and project a move to new lows. Chart 11 shows Spot Silver ($SILVER) with a head-and-shoulders pattern of the continuation variety. The prior move was down so this makes it a bearish continuation pattern.
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Chart 10
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Chart 11
GOLD MINERS AD LINE HITS NEW LOW... Chart 12 shows the Gold Miners ETF (GDX) with a continuation head-and-shoulders pattern as well. The ETF hit resistance in the 20 area in November-December, and again in March-April. A break below neckline support would project a move to new lows. The indicator window shows the Gold Miners AD Line ($GDXADP) breaking to new lows in late March. Breadth is clearly bearish and this favors further weakness in GDX.
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Chart 12
OIL HITS RANGE RESISTANCE ... Since we are hitting commodities today, chart 13 shows Spot Crude ($WTIC). First, note that I am working under the assumption that the long-term trend is down after the plunge from 105 to 45 (June to January). The only real action is in this year's trading range, which extends from the mid 50s to the mid 40s. The swing within this range is up, but oil hit range resistance last week and fell back. The mid March trend line and last week's low mark support at 50, a break of which would reverse this upswing. Chart 14 shows Natural Gas ($NATGAS) breaking to new lows and extending its long-term downtrend.
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Chart 13
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Chart 14
XLU HOLDS KEY MOVING AVERAGE... Chart 15 shows the Utilities SPDR (XLU) stalling just above the 200-day moving average. I am still bullish on XLU because it broke out in mid March and this breakout is holding, even though further upside has been limited. Notice that this bounce occurred near the 62% retracement and XLU is still above the rising 200-day moving average. The moving average tells me the long-term trend is up and the retracement amount is typical for corrections within uptrends. A close below 43.5 would warrant a reassessment. Before leaving this chart, note that XLU is positively correlated to the 20+ YR T-Bond ETF (TLT) and TLT is surging today.
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Chart 15
T-BOND ETF SURGES OFF SUPPORT... Chart 16 shows TLT breaking out with a big surge in mid March and holding this breakout. The ETF consolidated with a small ascending triangle and surged off the support zone today. Looks like a small breakout is in the cards and this would target a move to new highs. In other words, a continuation of the bigger uptrend is in play now.
