MARKING SUPPORT FOR BIOTECH ETFS, BANKING ETFS MAINTAIN TRENDS, FINANCE-STAPLES-HEALTHCARE LEAD NEW HIGHS, CHINESE STOCKS FALL FROM RETRACEMENT, HIGH-LOW PERCENT INDICATORS TURN, SECTOR RANKINGS REMAIN UNCHANGED
MARKING KEY SUPPORT FOR BIOTECH ETFS... Link for today's video. Biotechs were star performers in 2012, 2013 and 2014. These stocks, and their respective ETFs, are also leading in 2015, even after last week's big decline. The Biotech iShares (IBB) and Biotech SPDR (XBI) are both up double digits and easily leading other industry group ETFs. Their respective StockCharts Technical Ranks (SCTRs) have also been above 80 since October 2014.
Chart 1 shows IBB hitting a fresh 52-week high last week and then falling around 5% from this high. The decline certainly looks dramatic, but we have seen sharp declines in the recent past (late March and late April). At this point, the overall trend is still up and I am marking support in the 355-360 area. The June lows and rising 120-day EMA mark support here.
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Chart 1
There are two EMA pairings on this chart that chartists can also watch for a trend change. The 10-day EMA (green) remains above the 60-day EMA (red) and the 20-day EMA (pink) remains above the 120-day EMA (blue). A 10-60 cross would be medium-term bearish and a 20-120 cross would be long-term bearish. Charting note: These four EMAs roughly cover two weeks (10-day), one month (20-day), three months (60-day) and six months (120-day). Chart 2 shows the Biotech SPDR for reference.
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Chart 2
BANKING ETFS MAINTAIN TRENDS... The Regional Bank SPDR (KRE) has also been one of the leading industry group ETFs since early June. The finance sector is also one of the leading sectors right now. I am, therefore, interested in watching this industry group and sector during a pullback because a pullback within an uptrend could provide an opportunity to partake in that uptrend.
Overall, chart 3 shows that KRE has been bullish since February, which is when the two moving average pairs turned bullish and the SCTR moved above 60. Note that the SCTR surged just before the EMA signals. Even though a lower high formed last week, I would not turn overall bearish until a close below the support zone (42). In addition, I would also require bearish confirmation from the EMA pairs. As long as the bigger trend is up, the support zone in the 42-43 area is of interest. In other words, this is an area I am watching for a bounce within this bigger uptrend. Chart 4 shows the Bank SPDR (KBE) for reference.
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Chart 3
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Chart 4
FINANCE, STAPLES AND HEALTHCARE LEAD NEW HIGH LIST... Chart 5 shows High-Low Percent for the S&P 500 and the nine sectors. High-Low Percent equals new highs less new lows divided by total issues. High-Low Percent for the S&P 500 exceeded -5% for the first time since mid December. Even though this is a bearish development, note that the vast majority of new lows came from just three sectors: industrials, materials and energy. Weakness in these three sectors stems from weakness in commodities, such as copper, steel and oil. Energy HiLo% ($XLEHLP) hit -49% on Friday, Materials HiLo% ($XLBHLP) hit -32% and Industrials HiLo% ($XLIHLP) ended at -12. There were probably not any new highs in these three sectors so it is pretty safe to assume that these numbers represent the percentage of new lows in the each sector. Despite lopsided weakness in these two sectors, there are still pockets of strength in the stock market. New highs still outnumber new lows in the finance, healthcare and consumer staples sectors.
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Chart 5
CHINESE STOCKS FALL FROM RETRACEMENT ZONE... Chinese stocks were hit hard on Monday with the Shanghai Composite ($SSEC) falling over 8%. Chart 6 shows the index falling sharply in June, bouncing in mid July and then falling sharply on Monday (red line). Notice that the June decline broke two support levels and the July bounce retraced 38-50%. Today's decline ends this oversold bounce and signaled a continuation of the prior decline. The next support zone of note is marked by the consolidation in early 2015. Chart 7 shows the China A-Shares ETF (ASHR) breaking down in June, bouncing in July and peaking below the support break. The green areas mark the next support zones to watch.
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Chart 6
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Chart 7
HIGH-LOW PERCENT INDICATORS TURN BEARISH... Chart 8 shows an update to the indicator table for the major index ETFs. There are 24 signal boxes on this table and twelve are red (bearish). This means 12 are still bullish and the evidence is split. Of note, new lows expanded last week as High-Low Percent turned bearish for the S&P 500, S&P Small-Cap 600 and S&P MidCap 400. The bearish tilt in this indicator group is enough to give me a bearish tilt on the broader market right now. Chart 9 shows that the 60-day EMA of S&P 500 AD Percent ($SPXADP) is close to turning bearish again.
Chart 8
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Chart 9
SECTOR TABLE REMAINS LARGELY UNCHANGED... Chart 10 shows an update to the sector table. There are 54 signal boxes on this chart (nine sectors with six indicators each). I count 29 red boxes (53% Bearish) and 25 green boxes (47% Bullish). As with the index table above, this gives the overall market a bearish edge, but not a bearish mandate. The leading and lagging sectors remain the same with technology in the middle. Healthcare, consumer discretionary, finance and consumer staples remain net bullish, and leading. Utilities, industrials, materials and energy remain net bearish, and lagging. Even though these four sectors account for around 23% of SPY and 30% of RSP, their outsized declines are weighing on the broader market. Also note that the technology is net bearish and this is a big sector. For reference, chart 11 shows the consumer discretionary with the indicators still bullish. Notice that the 10-day EMAs for XLY and RCD remain above the 100-day EMAs.
Chart 10
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Chart 11
VIDEO DETAILS... Link for today's video.
