SPY FILLS THE GAP, TECHS AND UTILITIES LEAD, AIRLINES AND TRUCKERS LOOK BETTER THAN RAILS AND DELIVERY, AIRLINE SCTRS ARE STRONG, AMERICAN TESTS SUPPORT, DELTA AND UNITED CORRECT, ALASKA AND SOUTHWEST CONSOLIDATE
SPY FILLS THE GAP AND CHALLENGES RESISTANCE ... Link for today's video. Stocks got a big bounce on Monday morning as the major index ETFs erased most of the losses from Friday. Chart 1 shows the S&P 500 SPDR (SPY) moving back above 209 in early trading and filling Friday's gap. We will have to wait for the close to find out if this gap actually fills or not. Friday's gap was viewed as short-term bearish because it reversed the April upswing. Friday's gap-decline, however, was not enough to affect the bigger uptrend or triangle consolidation. What happens within this consolidation is anybody's guess because trading within remains quite volatile. The overall up trend is not in question. SPY hit a new high in February and stalled with a triangle into April. A break above triangle resistance would signal a continuation of the uptrend and open the door to new highs. The March-April lows mark first support in the 202.5-205 area. Chart 2 shows the Dow Diamonds (DIA) surging over 1% with a move back above 180.
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Chart 1
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Chart 2
EQUAL-WEIGHT TECH ETF CHALLENGES RESISTANCE... The technology and utilities sectors were leading the market in early trading on Monday. It is an unusual pair, but it is what it is. The next two charts break down these two sectors. Each chart shows the SPDRs, the equal-weight ETF, the small-cap ETF, High-Low Percent, the AD Line and the SCTRs. It is as complete of a sector picture as you will find anywhere. Chart 3 shows the Equal-weight Technology ETF (RYT) advancing to the upper trend line of a falling wedge and stalling the last seven days. The ability to hug the upper trend line shows sustained buying pressure and a breakout would signal a continuation of the bigger uptrend. XLK has a falling wedge as well, but the SmallCap Technology ETF (PSCT) formed a triangle and held up better. This relative strength is reflected in the StockCharts Technical Rank (SCTR) for PSCT, which is the highest of three (bottom window). Technology HiLo% ($XLKHLP) has been below +5% in April and is at zero right now. The shrinkage in new highs reflects the correction and I would not turn bearish unless new lows expand and High-Low Percent exceeds -5%. The XLK AD Line hit a new high in February and corrected into April. Look for a break above the early April high to end this corrective period.
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Chart 3
SMALL-CAP UTILITIES LEAD THE GROUP... Chart 4 shows the Equal-weight Utilities ETF (RYU) and Utilities SPDR (XLU) surging off their 200-day moving averages with big moves on Monday. In contrast, the SmallCap Utilities ETF (PSCU) held well above its rising 200-day moving average in April and is the strongest of the three, which is confirmed by the SCTR. Breadth has yet to turn around for the sector. Utilities HiLo% ($XLUHLP) has been at zero for weeks and needs to surge above +5% to turn bullish again. The Utilities AD Line ($XLUADP) hit a new high in early February and then corrected into April. Look for a break above the red resistance zone to end this correction.
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Chart 4
AIRLINES AND TRUCKERS HOLDING UP BETTER THAN RAILS AND DELIVERY... The Dow Transports can be divided into four industry group indices. Of these four, the DJ US Airline Index ($DJUSAR) and the DJ US Trucking Index ($DJUSTK) appear the strongest, while the DJ US Railroad Index ($DJUSRR) and DJ US Delivery Services Index ($DJUSAF) are the weakest. We can compare these four indices by comparing price to the 200-day moving average and analyzing price action since December. Chart 5 shows the Airline Index (top window) trading flat since early December and holding above its rising 200-day moving average. This suggests that the long-term trend is up. The falling channel since January is viewed as a corrective pattern and a move above 270 would break resistance. The Trucking Index (second window) has also been flat since early December and surged off the rising 200-day moving average today. A big triangle is taking shape and support is holding.
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Chart 5
The Railroad Index is clearly weaker than the first two. First, it formed a lower high in February and moved below the January low in April. This is a clear downtrend. Second, the index broke below the 200-day moving average in late March. The Delivery Services Index broke down in mid January and continued lower the last three months. The index is below its late January low and also below its 200-day moving average.
AIRLINE STOCKCHARTS TECHNICAL RANKS ARE STRONG... The next charts focus on the major US airline stocks because I think the long-term trends are up and the current consolidations are corrections within these uptrends, just as with the Airline Index above. Moreover, the StockCharts Technical Rank (SCTR) for each stock is quite high. The table below comes from the Sector Summary (S&P Sectors> Industrial Sector> Airlines). Notice that eight of the nine SCTRs are above 80 with Jetblue (95.8) leading the way. These strong SCTRs suggest that the airline group is worth a second look.
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Chart 6
AMERICAN AIRLINES TESTS SUPPORT... Chart 7 shows American Airlines (AAL) surging to new highs in November-December and then consolidating from December to April. It is a long consolidation, but AAL remains above the 200-day and is trading near support. This is the area to watch for a bounce that could foreshadow a breakout.
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Chart 7
DELTA AND UNITED CORRECT WITHIN UPTRENDS... Chart 8 shows Delta Airlines (DAL) hitting new highs from November to January and then correcting into April. DAL was one of the strongest in January, but turned into one of the weakest in early April as it retraced 50% of the prior advance. The decline formed a falling channel and I view this as a correction within an uptrend. The stock surged towards the upper trend line last week and the SCTR moved back above 80. Chart 9 shows United Continental (UAL) with a similar chart.
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Chart 8
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Chart 9
ALASKA AND SOUTHWEST HOLD ABOVE KEY MOVING AVERAGE... Chart 10 shows Alaska Air (ALK) hitting new highs into January and then stalling the last few months. Chartists can never be sure how far a correction will extend or if a correction will evolve into a bigger downtrend. The stock is currently testing support from the February lows. Look for a surge above 66 to trigger a small breakout and suggests a successful test. Barring a surge off current support, the stock could correct back to the rising 200-day and support in the 55-56 area. Chart 11 shows Southwest Airlines (LUV) with a similar chart.
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Chart 10
