FOUR KEY SECTORS IN HOLDING PATTERNS, TIMING ITB AND XHB, REGIONAL BANKS AND BROKER STAY STRONG, WATER BREAKS, OIL FORMS BULL FLAG, XES SURGES WITHIN WEDGE, MACD DIVERGENCES AND CHANDELIERS
50% OF S&P 500 REMAINS IN HOLDING PATTERN... The following charts and brief commentary come from Click here for Tuesday's webinar. The broader market continues to grind higher and we can point the finger at four sectors. Technology and healthcare are doing their part for the bull market, but industrials, consumer discretionary, consumer staples and finance have been rather flat. Flat is not necessarily bearish. It just means buying and selling pressure have equalized. We have yet to see a material uptick in selling pressure because key support levels have yet to be broken. The market cup, therefore, will remain half full as long as the majority of these sectors hold support. The first four charts show four flat sectors that account for almost 50% of the S&P 500.
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Chart 1
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Chart 2
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Chart 3
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Chart 4
REGIONAL BANKS AND BROKERS REMAIN STRONG... It is hard to argue with strength in the Broker-Dealer iShares (IAI) and Regional Bank SPDR (KRE). Chart 5 shows IAI breaking out and holding this breakout. The ETF has not move much since the breakout, but it is holding and remains bullish until proven otherwise. Chart 6 shows KRE working its way higher within a rising channel (blue). The ETF is up over 6% since early March and its SCTR is above 90.
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Chart 5
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Chart 6
OIL FORMS BULL FLAG AS XES FORMS WEDGE... Oil could get tricky over the next few days because of triple witching on Friday (not the option kind). The employment report, Greek deadline and OPEC meeting are all on Friday. Chart 7 shows the USO Oil Fund (USO) breaking flag resistance with a surge over the last four days. This breakout is valid as long as 20 holds and MACD remains positive. Chart 8 shows the Oil & Gas Equip & Services SPDR (XES) testing the double bottom breakout with a falling wedge. Look for a break above the late May high to reverse this wedge.
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Chart 7
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Chart 8
ARE MACD DIVERGENCES WORTH TRADING?... Tuesdays' webinar will use the S&P 500 and look at bullish and bearish divergences in MACD over a ten year period (the two prior bear markets and the current bull market). Here's the thing. Most bullish divergences forms in bear markets and most bearish divergences form in bull markets (like now). While some work, the majority do not result in major reversals and do not offer good trading signals. Of the 36 divergences identified, 11 resulted in positive trading outcomes and 25 were negative. That means the MACD divergence works around 30% of the time. Keep this in mind next time you see a divergence in MACD, RSI or another momentum oscillator. Here are two charts from the webinar. Note that I used the Chandelier Exit with these signals.
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Chart 9
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Chart 10
TIMELINE... for Today's Webinar Recording
00:00 to 09:45 - 50% of S&P 500 Remains in Holding Pattern
09:45 to 13:20 - Timing the Swings in ITB with a Raff Channel
13:21 to 16:00 - Regional Banks and Brokers Remain Strong
16:01 to 17:00 - Water Resources ETF Gets a Break
17:01 to 20:10 - Oil forms Bull Flags as XES Forms Wedge
20:11 to 31:15 - Stocks (ALK, BIIB, CTXS, FINL, GIII, JNS, NE, NYT, V)
31:16 to 45:00 - Using MACD Divergences and the Chandelier Exit
Click here for today's webinar
