AMAZON AND MICROSOFT POWER QQQ, BROAD INDICES-TECHS-ASIA DOMINATE NEW HIGHS, NEW HIGH-NEW LOW SCAN, RRG SHOWS BIFURCATION IN FINANCE, XLF AND RYF LAG, REGIONAL BANK AND BROKER ETFS CONSOLIDATE NEAR HIGHS, JAPANESE FINANCIALS MAKE A MOVE
QQQ SURGES TO NEW HIGH... Link for today's video. Large-cap techs took charge on Friday and powered the Nasdaq 100 ETF (QQQ) to a new high. The underlying index, Nasdaq 100, is now around 6% from its all time high, which was recorded in March 2000. Chart 1 shows QQQ surging to new highs in February, consolidating from early March to mid April and resuming the uptrend with a breakout this week. Notice that broken resistance turned into support in the 104-105 area. With the current breakout, QQQ has a new broken resistance zone that will turn into first support in the 108-109 area. The indicator window shows the StockCharts Technical Rank (SCTR) holding above 60 for over eight months, which shows relative strength. The SCTR dipped in March, but turned back up in early April and broke a small trend line ahead of this week's breakout in the ETF. For reference, chart 2 shows the Nasdaq 100 falling over 80% in less than three years and nearing break even after a 12+ year advance.
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
AMAZON AND MICROSOFT POWER QQQ... QQQ is doing it without Apple (AAPL) on Friday because the stock was actually down around midday. Amazon (AMZN) is doing the heavy lifting today with a double digit advance and massive gap. Chart 3 shows Amazon with a gap, price breakout and SCTR breakout in January. The stock continued higher into February, consolidated in March-April and gapped up again today. It is once again short-term overbought after a big move and may consolidate as it did in March.
(click to view a live version of this chart)
Chart 3
Microsoft, Google and Starbucks are also contributing to the breakout in QQQ. Chart 4 shows Microsoft (MSFT) with a massive island reversal. The stock gapped down in mid January, chopped around and then gapped up today. This created a price island and traders with short positions are trapped on this island with losses (like TWTR in early February). In addition to a price breakout, the SCTR broke above 60 to put MSFT into the relative strength side of the market. The stock is indeed short-term overbought so I would mark support in the 44.5-45 area and watch for a possible pullback.
(click to view a live version of this chart)
Chart 4
BROAD INDICES, TECH AND ASIA DOMINATE NEW HIGH LIST... The following lists show some key new highs and new lows over the last six trading days. There is some sample scan code provided in the next section. New highs of note include several broad stock indices, only three sector ETFs, several tech-related industry group ETFs and several Asian stock indices.
US Indices: Nasdaq, Nasdaq 100, NY Composite, S&P 500, S&P 500 Equal-Weight Index, Russell 1000 and Russell 3000.
(click to view a live version of this chart)
Chart 5
Breadth: S&P 1500 AD Line ($SUPADP), S&P MidCap AD Line ($MIDADP), HealthCare AD Line ($XLVADP). Chart 6 shows the S&P 1500 AD Line hitting a new high this week. There is no bearish divergence or sign of internal weakness on this chart.
(click to view a live version of this chart)
Chart 6
Sectors: Consumer Discretionary SPDR (XLY), Equal-weight Healthcare ETF (RYH), SmallCap HealthCare ETF (PSCH).
Industry Groups: Global Auto ETF (CARZ), Timber ETF (CUT), Internet ETF (FDN), Software iShares (IGV), Cloud Computing ETF (SKYY), Social Media Global ETF (SOCL), Solar Energy ETF (TAN). Note that FDN and SKYY were featured with bullish patterns in the Market Message on April 10th.
(click to view a live version of this chart)
Chart 7
Foreign Indices: Hang Seng Composite ($HSI), Shanghai Composite ($SSEC), Singapore Strait Times ($STI), South Korea Seoul Composite ($KOSPI), Nikkei 225 ($NIKK). John Murphy noted the new high in the Kospi this week. The chart below shows the Nikkei moving to a new high and exceeding 20,000.
(click to view a live version of this chart)
Chart 8
New Lows: Greece General Share Index ($ATG), Spot Lumber ($LUMBER) and Egypt ETF (EGPT). Chart 9 shows $ATG hitting a new low mid week as it dipped below the late January low.
(click to view a live version of this chart)
Chart 9
NEW HIGH-NEW LOW SCAN... Each week I run a scan looking for ETFs and stocks that hit new 52-week highs over the last five trading days. It is a simple scan that tells me the areas of the market with the most strength, and weakness. Below is the code for this scan. I use one of my ChartLists for this scan because it has a select group of ETFs. The example below uses [group is ETFNOUI] for the scan universe, which is all ETFs (no ultra or inverse). Note that users can use any group or ChartList to customize the scan.
New High Scan
[group is ETFNOUI]
and [[today's high > yesterday's daily max(252,high)]
or [yesterday's daily high > 2 days ago daily max(252,high)]
or [2 days ago daily high > 3 days ago daily max(252,high)]
or [3 days ago daily high > 4 days ago daily max(252,high)]
or [4 days ago daily high > 5 days ago daily max(252,high)]]
New Low Scan
[group is ETFNOUI]
and [[today's low < yesterday's daily min(252,low)]
or [yesterday's daily low < 2 days ago daily min(252,low)]
or [2 days ago daily low < 3 days ago daily min(252,low)]
or [3 days ago daily low < 4 days ago daily min(252,low)]
or [4 days ago daily low < 5 days ago daily min(252,low)]]
RRG SHOWS BIFURCATION IN THE FINANCE SECTOR... There are some splits within the finance sector and these can be seen on the RRG. The Finance SPDR and the Equal-weight Finance ETF are treading water and underperforming over the last few weeks, but the Broker-Dealer iShares and Regional Bank SPDR are near new highs and showing strength. In addition, John Murphy noted on Wednesday that the Bank SPDR (KBE) was nearing a breakout. It appears that three are strong and two are questionable. The difference in performance stems from the holdings and the weightings of these holdings. Chart 10 shows a Relative Rotation Graph (RRG) comparing XLF, RYF and four finance-related ETFs to SPY. Notice that KBE, KRE and IAI are in the leading quadrant and showing the most relative strength. The Insurance SPDR (KIE) just moved into the leading quadrant. In contrast, XLF and RYF are in the lagging quadrant and showing relative weakness.
(click to view a live version of this chart)
Chart 10
XLF AND RYF EXTEND CONSOLIDATIONS... Let's look at some of the individual charts. In an effort to cut through the noise and short-term fluctuations, the next few charts show one year timeframes with two exponential moving averages (20-day and 125-day). These EMAs cover roughly one month and six months. As far as analysis, I am mostly concerned with the relationship of the shorter EMA to the longer EMA and the direction of the longer EMA. The trend is up when the short EMA is above the long EMA and this uptrend is strong when the long EMA is rising. The trend is down when the short EMA is below the long EMA and this downtrend strong when the long EMA is falling. And, in case you are wondering, I am using EMAs instead of simple moving averages (SMAs) because EMAs are weighted towards recent price action. It is just a personal preference.
(click to view a live version of this chart)
Chart 11
Chart 11 shows the Finance SPDR (XLF) in a long-term uptrend. The ETF hit a new high, the long-term EMA is rising and the 20-day EMA is above the long-term EMA. Despite a clear uptrend, there is cause for concern because XLF could be forming a lower high in March. A lower high reflects diminished buying pressure during an advance. We have yet, however, to see an uptick in selling pressure because XLF is largely range bound since mid February. At this point, I still give the bulls the benefit of the doubt and will watch the March lows. A break below this support zone would affirm the lower high and could push the 20-day EMA below the 125-day EMA. The indicator window shows the StockCharts Technical Rank (SCTR) falling into the 40-60 zone and stalling. This is the moment-of-truth for relative performance. A break below 40 would signal relative weakness, while a break above 60 would signal relative strength. Chart 12 shows Equal-weight Finance ETF (RYF) with similar characteristics.
(click to view a live version of this chart)
Chart 12
REGIONAL BANK AND BROKER ETFS CONSOLIDATE NEAR HIGHS... Chart 13 shows the Broker-Dealer iShares (IAI) hitting a new high in mid March and then consolidating into April. The ETF has held the March lows into April and these mark the first support zone to watch around 42.
(click to view a live version of this chart)
Chart 13
Chart 14 shows the Regional Bank SPDR (KRE) within a very choppy uptrend over the last nine months. The 20-day EMA crossed the 125-day EMA six times because of the big swings. Keep in mind that I am not using this moving average strategy for timing. Instead, I am using it to help identify the trend and establish a trading bias. The bias is bullish now because the 20-day EMA is above the 125-day EMA and the long-term EMA is rising. This means I favor bullish setups. The March lows mark key support in the 32.5-33 area.
(click to view a live version of this chart)
Chart 14
JAPANESE FINANCIALS MAKE A MOVE... The Nikkei 225 ($NIKK) is one of the top performing indices this year with a 15% gain so far. In addition to the Japan iShares (EWJ) and Currency-Hedged Japan ETF (HEWJ), investors can get exposure to Japan through ADRs, which represent individual stocks. Keep in mind that individual stocks are riskier than ETFs and should be part of an overall portfolio or investment strategy. Jon Markman pointed out a multi-year breakout in Mitsubishi UFJ Financial (MTU) and this prompted me to look through the Japanese ADRs for other breakouts. First, chart 15 shows MTU with a long wedge extending from May 2013 to January 2015 and a big breakout this year. The stock hit a 52-week high this week. Even though the stock is short-term overbought, 52-week highs are usually not isolated events. Trend and momentum suggest that this stock will see more 52-week highs in 2015.
(click to view a live version of this chart)
Chart 15
Chart 16 shows Mizuho Financial (MFG) breaking above a long trend line and exceeding its October high with a breakout this week. Chart 17 shows Nomura (NMR) with a similar breakout. Chart 18 shows Orix (IX) breaking out of a 15 month channel with a surge above 80.
(click to view a live version of this chart)
Chart 16
(click to view a live version of this chart)
Chart 17
