WEBINAR DETAILS, AUTO ETF CORRECTS, ITB MAINTAINS UPTREND, LEISURE AND ENTERTAINMENT ETF TRENDS LOWER, RETAIL ETFS TAKE HITS, SMALL-CAPS REMAIN BULLISH OVERALL, TECH AND INDUSTRIALS REDDEN, INDICATOR AND SIGNAL OVERVIEW, BREADTH CHART LINKS

WEBINAR DETAILS... The charts and commentary below are from the Webinar on Tuesday, June 30th, at 1PM ET. In this Webinar, I looked at the key industry groups within the consumer discretionary sector because these hold the key to the most economically sensitive sector. I analyzed some key breadth indicators after Monday's route. I then covered an assortment of ETFs from technology, finance, industrials, materials and healthcare. And finally, I analyzed some key stocks from the technology, industrials and consumer discretionary sectors. Click here for the Webinar recording.

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Chart 1

AUTO ETF CONTINUES TO TREND LOWER... When it comes to US stocks, my eyes are on the industry groups within the consumer discretionary sector because this is the most economically sensitive sector. These industry group ETFs include the Retail SPDR (XRT), the MarketVectors Retail ETF (RTH), Home Construction iShares (ITB), Leisure and Entertainment ETF (PEJ) and the Global Auto ETF (CARZ), even though the latter is "global". The consumer discretionary sector is holding up so far and I am watching these key industry group ETFs closely.

Chart 2 shows the Global Auto ETF (CARZ) in a downtrend over the last two months. The ETF broke support in early June and the 10-day EMA broke below the 100-day EMA in mid June. This decline looks like a falling channel and could be corrective, but the immediate trend is down and a break above the late June high is needed for a reversal. For reference, chart 3 shows the DJ US Auto Index ($DJUSAU) within a downtrend since late March. The Raff Regression Channel defines this downtrend with resistance marked at 220. The auto side of the consumer discretionary sector is bearish right now.

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Chart 2

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Chart 3

ITB MAINTAINS UPTREND AS XHB TESTS BREAKOUT... Chart 4 shows the Home Construction iShares (ITB) taking a hit with the rest of the market on Monday and getting a bounce early Tuesday. I remain bullish on ITB because the ETF formed higher lows in May and surged off the channel trend line in late June. The 10-day EMA is also above the 100-day EMA and ITB shows good relative strength right now. Key support is set in the 26-26.5 area.

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Chart 4

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Chart 5

Chart 5 shows the Home Builders SPDR (XHB) breaking out in mid June and falling back to the breakout zone for its first test. This chart is bullish right now. Failure to hold the breakout would be negative, but I would not turn fully bearish unless XHB breaks key support in the 34.5-35 area.

LEISURE AND ENTERTAINMENT ETF TRENDS LOWER... Chart 6 shows the Leisure and Entertainment ETF (PEJ) in a downtrend since late March. The Raff Regression Channel and May high mark resistance in the 37.5-38 area. The ETF challenged resistance last week and the 10-day EMA moved above the 100-day EMA. The technical picture is improving and a breakout at 38 would be quite positive. Note that airlines account for 30% of PEJ. Chart 7 shows the DJ US Airline Index ($DJUSAR) within a downtrend and resistance marked at 235.

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Chart 6

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Chart 7

RETAIL SPDR TAKES A HIT... Chart 8 shows the Retail SPDR (XRT) with a potential lower high after Monday's decline. XRT was showing upside leadership in June and then got hit hard on Monday. The overall trend remains up and I am watching the May lows. A break below these lows and a 10-100 EMA cross would be bearish for retail and this would weigh on the consumer discretionary sector.

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Chart 8

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Chart 9

Chart 9 shows the MarketVectors Retail ETF (RTH) working its way lower since late March. This looks like a corrective wedge, but the immediate trend is down and nearing its moment-of-truth. A break below support at 74 would be quite bearish. Look for a move above 77 to break out of the wedge and signal a resumption of the uptrend.

SMALL-CAPS REMAIN BULLISH OVERALL... The next charts and tables are based on some trend and breadth indicators for the major index ETFs and sector ETFs. Details on these indicators can be found at the end of the commentary. Monday's decline was quite sharp, but all of my small-cap indicators remain bullish. Chart 10 shows the 10-day EMA above the 100-day EMA and the price trend is still up. Long-term, the S&P 600 %Above 200-day EMA (!GT200SML) remains above 50% and would need to break below 40% to trigger a bearish signal. High-Low Percent turned negative, but we have yet to see enough of an expansion of new low to turn bearish.

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Chart 10

Medium-term, the 60-day EMAs for AD Percent and AD Volume Percent dipped into negative territory, but need to break below -3% to show enough selling pressure for a bearish signal. The S&P 600 %Above 50-day EMA (!GT50SML) fell below 50%, but needs to break 30% to trigger a bearish signal. It is going to take a few more days of selling pressure to get a bearish signal out of small-caps.

S&P 500 AND NASDAQ 100 TURN MEDIUM-TERM BEARISH... Chart 11 shows a table with the key indicators for the S&P 500, S&P MidCap 400, S&P Small-Cap 600 and Nasdaq 100. Notice that the small-cap indicators are all green (still bullish). Also note that only one mid-cap indicator is bearish. Small-caps and mid-caps are still the place to be. Three of the six indicators are bearish for the S&P 500 and Nasdaq 100. This confirms the technical damage pointed out by John Murphy in Monday's Market Message. At this point, it is just the medium-term indicators that favor the bears. The long-term indicators are still bullish and it will take more selling pressure to reverse these. Note that this is a simple text-color table created with MS Excel.

Chart 11

TECH AND INDUSTRIALS REDDEN ... The sector table added a bit more red over the past week. These sectors are also loosely ranked based on the number of green boxes. The consumer discretionary and healthcare sectors are by far the strongest with all indicators flashing green (bullish). The energy and utilities sectors are completely red and clearly bearish, while the industrials and technology sectors are mostly red. There is more red on the right half of the table and this reflects medium-term weakness. The left side of the table is green. The upper left quarter of the table is green and this reflects long-term positives for healthcare, consumer discretionary, finance, consumer staples and materials.

Chart 12

CONSUMER DISCRETIONARY BECOMES OVERSOLD ... Chart 12 shows the Consumer Discretionary SPDR (XLY) and the Equal-Weight Consumer Discretionary ETF (RCD) with the assortment of breadth indicators. Both ETFs are still in uptrends and have been since late October. High-Low Percent turned negative on Monday, but needs to break -5% to show enough selling pressure to warrant a bearish signal. Of note, the 60-day EMAs for AD Percent and AD Volume Percent triggered bullish last week, and this means all medium-term and long-term indicators are bullish. Furthermore, the Consumer Discretionary %Above 20-day EMA (!GT20XLY) plunged below 30% to become short-term oversold. This puts XLY and RCD at interesting junctures. In other words, chartists should watch for short-term bounce and possibly an extension of the bigger uptrend. Note that the Healthcare %Above 20-day EMA (!GT20XLV) is also short-term oversold.

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Chart 13

INDICATOR AND SIGNAL OVERVIEW... The 10-day EMA and 100-day EMA are used for trend identification. Picking the right exponential moving averages is a real challenge. I do not want to optimize or curve fit, but I do want to capture the four to six month trend. It is impossible to eliminate whipsaws and pick the perfect pair. A 10-day EMA smooths two weeks of price action and 100 days covers around 5 months. This is basically a compromise on my part. I like the 10-70 EMA pair and the 25-125 EMA pair. The 10-100 pairing fits in the middle. The trend is down when the 10-day EMA moves below the 100-day EMA and up when the 10-day EMA crosses above the 100-day EMA. As far as the sector table is concern, the trend is bullish when BOTH the sector SPDR and the equal-weight sector ETF have bullish crossovers and remains bullish until BOTH have bearish crossovers. Requiring both for a signal change can help reduce whipsaws.

The Percent above 200-day EMA and High-Low Percent are the long-term indicators. The 200-day EMA is a long-term exponential moving average and it takes at least 52-weeks to generate a 52-week high or low.

The 60-day EMAs of AD Percent and AD Volume Percent are medium-term indicators. These two often trigger signals before the long-term indicators, but not all medium-term signals lead to long-term signals. In other words, the medium-term indicators can turn bearish during a correction and this correction might not affect the long-term indicators. The Percent above 50-day EMA is also a medium-term indicator.

There are bullish and bearish triggers set just above and below the mid points for the breadth indicators. These thresholds are designed to reduce whipsaws during corrective moves. For example, the zero line is the mid point for the 60-day EMA of AD Percent. The bullish threshold is set at +3% and the bearish threshold is set at -3%. A bullish signal triggers with a break above the bullish threshold and remains valid until a bearish signal triggers. The same holds for a bearish signal.

The Percent above 20-day EMA is used to identify short-term overbought and oversold conditions. Ideally, chartists should look for short-term oversold conditions when the other indicators are bullish. This would indicate a correction within an uptrend and could present a low risk entry point. Likewise, chartists should short-term overbought conditions when the other indicators are bearish. Here are the individual thresholds.

Percent above 200-day EMA: Cross above 60% is bullish and cross below 40% is bearish.

High-Low Percent: Cross above +5% is bullish and cross below -5% is bearish.

60-day EMA of AD Percent: Cross above +3% is bullish and cross below -3% is bearish.

60-day EMA of AD Volume Percent: Cross above +3% is bullish and cross below -3% is bearish.

Percent above 50-day EMA: Cross above 70% is bullish and cross below 30% is bearish.

Percent above 20-day EMA: Cross below 30% is oversold and cross above 70% is overbought.

BREADTH CHART LINKS... S&P 500 Breadth Chart

S&P MidCap 400 Breadth Chart

S&P SmallCap 600 Breadth Chart

Nasdaq 100 Breadth Chart

Consumer Discretionary Sector Breadth Chart

Finance Sector Breadth Chart

Technology Sector Breadth Chart

Industrials Sector Breadth Chart

Consumer staples Sector Breadth Chart

Healthcare Sector Breadth Chart

Utilities Sector Breadth Chart

Materials Sector Breadth Chart

Energy Sector Breadth Chart