STOCK UPTREND WEAKENS -- INDUSTRIAL SPDR RUNS INTO RESISTANCE AT 50-DAY LINE -- BOEING LEADS AEROSPACE LOWER -- ALUMINUM AND CHEMICALS PULL MATERIALS SPDR LOWER -- DOW INDUSTRIALS FALL BELOW 50-DAY LINE AS S&P 500 STALLS AT FEBRUARY HIGH
BOEING LEADS INDUSTRIAL SPDR BELOW ITS 50-DAY LINE... The stock rally is starting to lose some upside momentum. That's partially because some market sectors are running into resistance at their 50-day moving average. The daily bars in Chart 1 show the Industrial Sector SPDR (XLI) slipping back below its 50-day moving average today (blue circle). The XLI also backed off from a resistance line drawn over its January/February peaks (red arrow). The XLI/SPX relative strength ratio (top of chart) has been dropping which reflects the group's recent underperformance. Aerospace stocks are a big reason why. Chart 2 shows the Dow Jones U.S. Aerospace Index falling below its 50-day line as well. It's the weakest group in the XLI today. And its weakest stock is Boeing (BA). Chart 3 shows the stock also falling below its 50-day line. Its relative strength line (top of chart) is dropping as well. Boeing is also the day's biggest Dow loser.
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Chart 1
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Chart 2
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Chart 3
ALUMINUM AND CHEMICALS WEIGH ON MATERIALS... Industrials aren't the only sector running into resistance at their 50-day average. Chart 4 shows the Materials Sector SPDR (XLB) doing the same. It also failed to clear resistance at its late February high on a closing basis (red line). The XLB is being pulled down today by aluminum stocks and commodity chemicals. Chart 5 shows Century Aluminum (CENX) falling below its 50-day line to lead that metal group lower. Chart 6 shows DowDupont (DWDP) being rejected by its 50-day line.
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Chart 4
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Chart 5
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Chart 6
DOW LEADS MARKET LOWER ... It's usually not a good sign when one of the major U.S. stock indexes diverges from the others in a rising trend. But that's what the Dow is doing. Chart 7 shows the Dow Industrials falling below its 50-day average after failing a test of its January/February declining trendline. Failure to reach its late February peak also caused a short-term "negative divergence" with the S&P 500 which is up against that chart barrier. Chart 8 shows the S&P 500 failing to close above its late February high (red line). The 12-day Rate of Change (ROC) indicator in the top box is also starting to weaken (black arrow). That suggests that the SPX may be headed back toward a test of its 50-day line. Small caps have outpaced large caps during the recent rally. But they too may be running into a wall. Chart 9 shows the Russell 2000 iShares (IWM) up against potential resistance at its January high (see circles). That's a logical spot to expect some profit-taking to emerge.
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Chart 7
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Chart 8
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Chart 9
TECHNOLOGY SPDR LOOKS OVERBOUGHT ... Technology has been the only sector to reach a new record. But it looks over-extended. The daily bars in Chart 10 show the Technology sector SPDR (XLK) still in an uptrend. Its 14-day RSI line, however, is not keeping pace (blue line). It's usually a sign of an over-extended market when its RSI line fails to keep up. The falling blue trendline in Chart 10 shows the RSI line well below its January peak. That creates a short term "negative divergence" which usually leads to some profit-taking. All of the charts shown herein carry the same message. The stock rally is starting to weaken.
