EW S&P 500 STALLS NEAR HIGHS, SEMI SPDR BREAKS OUT, THREE SEMICONDUCTOR STOCK BREAKOUTS, AIRLINE INDEX CORRECTION, THREE AIRLINE STOCKS, THE REAL COMMODITY LEADERS
EQUAL-WEIGHT S&P 500 CONSOLIDATES NEAR HIGHS... Link for today's video. The EW S&P 500 ETF (RSP) has yet to confirm the new high in the S&P 500 SPDR (SPY), but RSP is close to a new high and the current uptrend favors a new high sooner rather than later. Chart 1 shows RSP hitting new highs throughout 2015 and then stalling below 83 the last few weeks. The trend since moving above 79 in late November is choppy, but clearly up as the ETF continues to forge new highs. The red dotted lines show a pullback from late April to early May and the ETF broke above the upper trend line last week. This could be the break that leads to new highs. As far as the overall uptrend is concerned, the December trend line and March lows mark key support in the 79-80 area.
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Chart 1
The indicator window shows the RSP:SPY ratio falling since April, which means RSP is underperforming SPY (large-caps). Put another way, it also means SPY is outperforming RSP. I am not that concerned with relative weakness in RSP because the ETF is less than 1% from its high and has yet to break down on the price chart. Relative weakness is a relative issue, not an absolute issue. Chart 2 shows SPY breaking within a rising channel marked by the green dotted lines.
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Chart 2
SEMICONDUCTOR SPDR BREAKS OUT OF CONSOLIDATION ... The Semiconductor SPDR (XSD) continues to show relative strength and recently broke out of a triangle consolidation. Chart 3 shows XSD with a massive advance from October to March (almost 50%). The ETF then moved into a holding pattern as a triangle formed. A triangle after an advance is typically a bullish consolidation that represents a rest within the uptrend. The breakout over the last few days signals that this rest is ending and the bigger uptrend is resuming. The March-May lows mark key support in the 84-85 area. The indicator window shows the SCTR holding above 80 since late January. This means XSD is one of the strongest ETFs in our universe (excluding inverse and leveraged ETFs).
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Chart 3
AVAGO, QORVO AND SKYWORKS LEAD SEMIS... The next three charts show some very strong semiconductor stocks. Even though it may seem like these are in mature uptrends, nobody really knows the exact stage of a trend. It could be the third inning, the six inning or even the ninth inning. I don't know. What I do know, however, is that these trends are up and these stocks show relative strength right now. Chart 4 shows Avago (AVGO) getting a wedge breakout over the last few days. This is clearly one of the leading semiconductor stocks right now because its SCTR has been above 90 since mid January. The SCTR only goes back to mid January because the stock was added to the large-cap list then.
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Chart 4
Chart 5 shows Qorvo (QRVO) hitting a new high in late March and pulling back with a wedge into early May. The stock broke out with a gap and surge above 75, and this gap is holding. Watch 70 for a filled gap and failed breakout. The indicator window shows the SCTR above 90.
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Chart 5
Chart 6 shows Skyworks Solutions (SKWS) in a steady uptrend from mid October to mid March and a triangle consolidation into mid May. The stock surged over 3% on Monday and broke out of a consolidation. The indicator window shows the SCTR above 90 since late October.
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Chart 6
AIRLINE INDEX BIDS TO END CORRECTION... It seems like the correction that will never end, but I still think the DJ US Airline Index ($DJUSAR) is simply correcting within a bigger uptrend. Chart 7 shows the index surging over 70% and hitting a new high in late January. This surge looks like an impulse move and part of a bigger uptrend. Even though the current decline has extended over three months, it retraced just 38% of the prior advance with a rather subtle decline . The January trend line and April high mark a resistance zone to watch for a breakout that would end the correction.
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Chart 7
ALASKA, DELTA AND SOUTHWEST AIRLINES... The next three charts show Alaska Air (ALK), Delta (DAL) and Southwest (LUV) in various correction stages. Chart 8 shows ALK with a long triangle since early February. This consolidation is just a way to digest a 70+ percent advance. A break above the red resistance zone would end the consolidation and signal a continuation higher.
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Chart 8
Chart 9 shows Delta attempting to end its correction with a channel breakout in late April. The stock fell back into early May, but formed a higher low and then exceeded the late April high. The May low, Raff Regression Channel and a buffer mark support in the 42-4 area.
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Chart 9
Chart 10 shows SouthWest with a falling wedge the last two months. Even though this looks like a correction, the immediate trend is down as long as the wedge falls. The wedge trend line and late April high mark resistance in the 43-44 area.
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Chart 10
COCOA AND COTTON LEAD COMMODITIES... Even though oil is up sharply (~13%) over the last three months, it is still down over 20% on a six month timeframe and it is a lagging commodity overall. The true leaders are commodities that show gains over both timeframes. Only four commodities fit that bill right now: cotton, cocoa, silver and palladium. Charts 11 and 12 shows screenshots from a ChartList with the spot commodity prices available at StockCharts. Chart 11 is sorted by the 3-month percentage change and chart 12 is sorted by the 6-month change. Silver and palladium are barely up on the three month timeframe and could turn negative with any weakness. The two positive standouts are Spot Cotton ($COTTON) and Spot Cocoa ($COCOA). On the downside, Spot Coffee ($COFFEE) and Spot Lumber ($LUMBER) are the weakest. Note that I will show how to create such a ChartList in Tuesday's webinar.
Chart 11
Chart 12
COCOA TRACES OUT CLASSIC ELLIOTT ... Chart 13 shows Spot Cocoa hitting new highs throughout 2014 and then pulling back into 2015. Cocoa found support near the 50% retracement line twice this year and surged above resistance with a big move last week. This breakout ended the correction and signals a continuation of the bigger uptrend. The indicator window shows Aroon Up crossing above Aroon Down in March and then hitting 100 last week. This Aroon sequence signals the beginning of an up move.
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Chart 13
I don't use Elliott Wave very often, but there is a clear 5-wave sequence working on this chart. In addition, Waves 2, 3 and 4 show some classic characteristics. The Wave 2 pullback was very deep, but did not break below the Wave 1 low. Second waves are often deep because it is the first pullback in the new uptrend. The Wave 3 advance extended over a year and Cocoa gained over 50%. Third wave advances are usually the longest in time and price appreciation. The Wave 4 correction found support near the Wave 1 high. Fourth waves are not supposed to overlap with first waves. Even though the low of Wave 4 did overlap with the high of Wave 1, chartists should allow a little flexibility in interpretation and determine if the "spirit" of the rule is upheld. Chart 14 shows the Cocoa ETN (NIB) with a double bottom breakout and first support marked at 38. Notice that the SCTR is above 90.
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Chart 14
COTTON ETN SCORES STRONG SCTR... Chart 15 shows Spot Cotton ($COTTON) with a series of rising peaks and rising troughs since January. Cotton broke above the October-February highs in April and May. Also notice that cotton is trading above the 200-day SMA and the 50-day is above the 200-day SMA. The Raff Regression Channel and April low mark support in the 62 area. Chart 16 shows the Cotton ETN (BAL) with a similar pattern and the SCTR above 80. Note that NIB, BAL and other commodity ETNs are relatively thinly trading and not for everyone.
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Chart 15
