RRG FAVORS SMALL-CAPS, IJR CONSOLIDATES NEAR HIGHS, HEALTHCARE SPDR STALLS AFTER BREAKOUT, MEDICAL SUPPLIES AND MEDICAL EQUIPMENT INDEXES, XLB CORRECTS WITHIN UPTREND, COMMODITY CHEMICALS AND STEEL INDEXES, WEBINAR DETAILS
RRG FAVORS SMALL AND MID CAPS... Note that Julius de Kempenaer and Arthur Hill (moi) recorded a webinar on Tuesday, June 16th. The following charts and commentary come from this webinar. More charts and detailed explanations can be found on webinar recording.
(from Julius de Kempenaer) Chart 1 shows a daily Relative Rotation Graph (RRG) with three market-cap indices and compares them to the S&P Total Market Index ($SPSUPX). The rotation of the S&P MidCap 400 and S&P Small-Cap 600 is clear as both are outperforming. The green trail shows the very strong relative trend for $SML because it is the furthest from the benchmark (center point)
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Chart 1
SMALL-CAPS CONSUMER STAPLES GET INTERESTING ... (from Julius de Kempenaer) Chart 2 shows a Relative Rotation Graph (RRG) with the nine small-cap sector ETFs from PowerShares. The SmallCap Consumer Staples ETF (PSCC) caught my eye because it is on the verge of crossing into the leading quadrant (blue to green). This is remarkable because the exact opposite is happening on the RRG with the large-cap SPDRs. There we see XLP inside the lagging quadrant and heading further down. Such a setup is interesting because it suggests that there area opportunities to divide the same sector in potential longs (small-caps) and potential shorts (large-caps).
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Chart 2
IJR CONSOLIDATES NEAR HIGHS... The small-cap and mid-cap index ETFs continue to lead the market on the price charts as well. Chart 1 shows the S&P SmallCap iShares (IJR) with two uptrends at work. First, the green Raff Regression Channel defines the bigger uptrend with key support in the 114-115 area. Second, the blue Raff Regression Channel defines the short-term uptrend with support marked in the 117-118 area. Even though the news is thick with sensation, there is no reason to turn bearish on this chart unless IJR closes below 117. Such a move would signal an increase in selling pressure and reverse the short-term uptrend, not the medium-term uptrend. A break below 114 would be needed to show enough selling pressure to reverse the medium-term uptrend. The indicator window shows RS-Momentum moving above 100 in mid May and RS-Ratio following in early June. Chart 4 shows the S&P MidCap SPDR (MDY) with similar characteristics.
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Chart 3
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Chart 4
HEALTHCARE SPDR STALLS AFTER BREAKOUT... Chart 5 shows the HealthCare SPDR (XLV) breaking out in mid May and then stalling over the last few weeks. The breakout is largely holding and XLV is less than 2% from another new high. I would view this breakout as bullish as long as 73 holds and expect a continuation of the uptrend. While a break below 73 would be negative, it would not reverse the bigger uptrend because XLV has tons of support in the 71 area. A break below the March-April lows would reverse the bigger uptrend. The indicator window shows the price relative (XLV:SPY ratio) moving higher even as XLV stalled. This means XLV was holding up better than SPY over the last few weeks. In fact, the price relative is on the verge of hitting a new high as XLV continues to show relative strength.
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Chart 5
MEDICAL SUPPLIES AND EQUIPMENT INDEXES ... The DJ US Biotech Index ($DJUSBT) and the DJ US Health Care Providers Index ($DJUSHP) are the strongest of the industry groups within the healthcare sector. Chartists can look at the Biotech SPDR (XBI) and HealthCare Providers ETF (IHF) for comparable ETFs. Elsewhere, chart 6 shows the DJ US Medical Supplies Index ($DJUSMS) with a surge in October-November and a choppy uptrend since December. Sound familiar. The index is just above support and the trend here is up as long as 650 holds. Chart 7 shows the DJ US Medical Equipment ($DJUSAM) with a new high in April and a triangle the last eight weeks. Look for a break above triangle resistance to signal a continuation of this uptrend.
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Chart 6
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Chart 7
XLB CORRECTS WITHIN UPTREND... Chart 8 shows the Materials SPDR (XLB) within a long-term uptrend on the weekly chart. The ETF hit a new high in February and then stalled with a lot of support in the 48-50 area. First, there are three trend lines converging on the 48-50 area. Why three? Because I wanted to see every combination. Perhaps more importantly, the March low marks key support at 48. A break below this support zone would reverse the current uptrend.
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Chart 8
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Chart 9
As long as XLB is in a long-term uptrend on the weekly chart, declines on the daily chart are viewed as corrections or mere pullbacks. Chart 9 shows XLB within an immediate downtrend since mid May. The Raff Regression Channel defines this correction with resistance marked at 51. Look for a breakout here to reverse the five week slide. Chartists can also look for MACD to turn up and break its signal line.
COMMODITY CHEMICALS REST WITHIN UPTREND... There are two interesting groups within the materials sector. Chart 10 shows the DJ US Commodity Chemical Index ($DJUSCC) hitting a new high in late April and then correcting with a falling wedge the last seven weeks. This also represents a correction or rest within the uptrend. A resistance breakout would end this correction and signal a continuation higher.
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Chart 10
STEEL INDEX HITS MAKE-OR-BREAK LEVEL... Chart 11 shows the DJ US Steel Index ($DJUSST) at its make-or-break level. The index hit a 52-week low in January and is below the falling 200-day moving average. Even though the long-term trend could be down, the immediate trend (five months) is up with a rising wedge taking shape. The bulls have the edge as long as this wedge rises. The index is battling support in the 200 area and a break here would reverse the five-month uptrend. Chart 12 shows US Steel (X) with a similar pattern.
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Chart 11
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Chart 12
WEBINAR DETAILS... Link for today's webinar.
