SMALL-CAP ETF TESTS SUPPORT, SMALL-GROWTH AND EW QQQ SURPRISE, FINANCE-HEALTHCARE-TECH-STAPLES LEAD, BANK ETFS FORM CONTINUATION PATTERNS, HACK HITS KEY RETRACEMENT, TWO CYBER SECURITY STOCKS, VIDEO DETAILS
SMALL-CAP ETF TESTS SUPPORT AGAIN... Link for today's video. I noted that the "average" stock is in correction mode in last week's Market Message and also showed the short-term downtrends in the small-cap, mid-cap and equal-weight ETFs. These short-term downtrends remain in play, but I am lowering resistance for the S&P SmallCap iShares (IJR). Chart 1 shows IJR hitting a 52-week high in late June and then falling a whopping 7% from the June high to the July low. Yes, I am being a bit ironic here. A 7% decline from high to low is not very much, especially after a 23.7% advance from the October low to the June high. An index is entitled to a correction after such an advance. The lower highs and lower lows in July-August define this immediate decline. Previously, I drew a Raff Regression Channel to define this decline, but have now opted for the red channel lines. The Raff Channel remains in gray for reference. The upper trend line and the early August high mark channel resistance in the 117-118 area. Look for a breakout here to end the correction and signal a resumption of the uptrend. Chart 2 shows the Russell 2000 iShares (IWM) for reference.
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Chart 1
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Chart 2
SMALL-GROWTH AND EQUAL-WEIGHT QQQ SURPRISE... Chart 3 shows 18 broad index ETFs ranked by the StockCharts Technical Rank (SCTR). Note that this list includes two value-growth pairs. I created this ChartList and am showing it in "Summary" format with the three month percentage change. As we can see, the Nasdaq 100 ETF, Nasdaq 100 Equal-Weight ETF, Russell 1000 Growth ETF, Russell 2000 Growth ETF and S&P 100 ETF are the top performers. Relative strength in large-caps is well-documented right now, but also notice that the Nasdaq 100 Equal-Weight ETF and Russell 2000 Growth ETF are also showing relative strength. In addition, notice that the Russell 2000 Value iShares is at the bottom of the barrel. This indicates that value portion of the Russell 2000 is weighing on the index as a whole. The growth portion is doing just fine.
Chart 3
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Chart 4
SECTOR LEADERS AND LAGGARDS REMAIN UNCHANGED... Chart 5 shows 18 sector ETFs ranked by their SCTR. These sector ETFs cover the nine sector SPDRs (large-cap weighted) and the nine equal-weight sector ETFs. Notice that six of the eighteen SCTRs are above 90, and another three are above 80. This means nine of the eighteen sector ETFs (50%) have very strong SCTRs and these are the leading sectors right now. In particular, healthcare, consumer staples and finance stand out as leaders because both the SPDR and the equal-weight sector ETF are in the top tier. Large-cap technology and large-cap consumer discretionary is also showing relative strength. The bottom tier is dominated by industrials, materials and energy.
Chart 5
BANK SPDRS FORM BULLISH CONTINUATION PATTERNS... Chart 6 shows the Bank SPDR (KBE) with a potential ascending triangle taking shape the last two months. The higher low in late July and early August is still under construction and resistance is set just above 37. A break above resistance would confirm the pattern and argue for a continuation of the existing uptrend. The indicator window shows the medium-term PPO (green) and long-term PPO (red) in positive territory. The short-term PPO (gray) is back in positive territory and turning up again. Chart 7 shows the Regional Bank SPDR (KRE) with a triangle forming within a bigger uptrend.
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Chart 6
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Chart 7
HACK HITS KEY RETRACEMENT... Chart 8 shows the Cyber Security ETF (HACK) hitting a 52-week high with the move to 34 and then forming a falling wedge as it retraced 50% of the February-June advance. The 52-week high and positive PPO (20,120,1) suggests that the long-term trend is up. Assuming a long-term uptrend, this would mean the falling wedge is a correction within that uptrend. Also note that the pattern and the size of the retracement are normal for corrections within uptrend. This puts HACK at an interesting juncture and the ETF is bouncing with a 1+ percent gain in early trading on Monday. There are two resistance levels to watch. First, a break above 31 would be short-term bullish. Second, a follow thru break above the mid July high would fully reverse the two month down turn. There is also a new cyber security ETF in town: the FirstTrust Nasdaq CEA Cybersecurity ETF (CIBR) started trading on July 7th.
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Chart 8
FIREEYE HITS LONG VOLUME-BY-PRICE BAR... Within the cyber security group, chart 9 shows FireEye (FEYE) hitting new highs in June and then correcting into July and August. The stock returned to the apex of the prior triangle and this zone represents a lot of price action. Notice that the longest volume-by-price bar is in the 42.5-45 zone and this confirms potential support as well. At this point, the immediate trend for FEYE is down and the late July gap is the first area to watch. A move above 47.5 would fill the gap and break trend line resistance. This would provide the first clue that the correction is ending and the bigger uptrend is resuming.
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Chart 9
CHECKPOINT BIDS TO HOLD GAP ZONE... Chart 10 shows CheckPoint Software (CHKP) hitting a new high in May and then retracing around 50% of the October-May advance with a decline to the 77 area. I am interested in this stock from a bullish standpoint because it gapped up and broke resistance with a big move on July 22nd. CHKP subsequently fell back into the gap zone with a decline to around 80 and a falling wedge of sorts. The stock is making an attempt to break wedge resistance with a move above 82 again today. The 31-July high and 6-Aug high mark resistance in the 83-83.3 area. Look for a close above this level to complete the wedge breakout.
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Chart 10
VIDEO DETAILS... Link for today's video.
