The Gold SPDR (GLD), Euro ETF (FXE) and the 20+ YR T-Bond ETF (TLT) are all up year-to-date and showing positive correlation. This is not a big surprise because gold is negatively correlated to the Dollar and negatively correlated to the 10-yr T-Yield ($TNX). The Euro accounts for around 57% of the US Dollar ETF (UUP) and a strong Euro translates into a weak Dollar ETF. Treasury bonds and yields move in opposite directions and this means higher bond prices translate into lower yields. Furthermore, chartists can clearly see that GLD, FXE and TLT were down from September to December. The correlation here is also positive because all three moved in the same direction.
The Rare Earth Metals ETF (REMX) had glory days from October to February. Then a slide ensued where a lot of the basic materials were falling down. Today the REMX ETF looks interesting as the chart has a new pattern of higher lows and higher highs with todays upside push. It is back above the 200 DMA and trying to break above the 50 DMA. The downtrend in Relative Strength has been broken and it is trying to make new 1-month relative strengh highs.
Textron (TXT), which is part of the industrials sector and the defense-aerospace industry, surged to new highs after the election and then declined in 2017. I consider this a correction within a bigger uptrend because the decline retraced less than 50% of the prior advance and the stock remains above the rising 40-week EMA. A channel formed over the last few months to define the immediate downtrend. A break above channel resistance would signal an end to the correction and a resumption of the bigger uptrend. Signs of an upturn are already emerging as the PPO (5,30,5) turned up and crossed above its signal line for the first time this year.
Plan your Trade and Trade your Plan
Intel (INTC) has been trading in bullish sideways fashion since topping in October. The Dow Jones U.S. Semiconductor Index ($DJUSSC) has continued to rise and lead the benchmark S&P 500 on a relative basis - even while INTC consolidates. A breakout in Intel would measure to 42 based on its ascending triangle. That's a tidy profit from the current price of 35.53. Given the strength in its industry group, INTC could make a fairly quick push higher. Here's the chart:
A lot of people who analyze the market including portfolio managers will talk about supply and demand, or the battle between buyers and sellers. This could not be more evident in the Russell Tracking ETF (IWM). Since December 9th the IWM has been in a sideways trading range, whereas the NASDAQ has been up humongously since then.
The $RUT is charting some indecision. The rising highs but slightly lower lows suggests the range of indecision is expanding. On April 25th we see the chart gapping up to new highs for the first time in 7 weeks. April 26th the market trades higher but closes mid range. The following day shows an inside day and then a big push down on Friday April 28th as a blue candle. Essentially what happened here is the market ran out of buyers at new highs and the price fell back. We need to wait for the end of today to complete today's price bar, but the 2-month uptrend in Relative Strength appears to be breaking today. If nothing else, its suggesting we pay attention. The horizontal dotted line on the price panel touches the top of the December 9th price bar, and we are struggling to get back above this level again after surging to new highs only two weeks ago. Five months later price reads as unchanged. This 138ish level is a real support/resistance line.
I was running through some charts today and came across and interesting setup - in Xerox of all names. It has been a long time since Xerox crossed my path. The company provides document management solutions with both hardware and services. It is a $7.2 billion company and part of the S&P 500. Based on the chart, things may be looking up. The stock broke out with a gap and surge in January and hit a 52-week high in February. After a 30+ percent gain, the stock was ripe for a correction and it fell back to the 6.90 area in April. Notice that a falling channel of sorts formed and the stock retraced around 38% of the prior surge (sans spike). There are signs that this correction may be ending because MACD turned up the last few weeks. A resistance breakout would complete the reversal and argue for a continuation of the bigger uptrend. Note that Xerox is a low-priced stock and this means it carries above average risk.
Thanks for tuning in and have a great day!
--Arthur Hill CMT
Plan your Trade and Trade your Plan
First Solar (FSLR) has been beaten down for a while. Last week finally delivered a huge up day with lots of volume accompanying the move. Some of that volume was short sellers covering but the chart is getting ready to test breaking through a year long trend line. The SCTR is also pushing above 50 for the first time in a year. The relative strength in purple is still weak so that is a negative. We would like to see this starting to make three month highs. Below the chart the volume candles are starting to perk up recently. Perhaps the down trend is dying and the stock is about to get its day in the sun.
Merck is showing signs of life as it bounces off a breakout zone and the Stochastic Oscillator turns up. The overall trend is up because the stock hit a 52-week high in February and is above the rising 40-week moving average. After a breakout surge earlier this year, the stock fell back to the breakout zone with a classic throwback. The recent upturn in the Stochastic Oscillator suggests that the pullback is ending and the bigger uptrend is resuming.
Plan your Trade and Trade your Plan
As technicians, we look for prior price resistance to act as solid support once the resistance has been broken. That principle came into play on Nike, Inc. (NKE) as it tested a major price support just beneath 54.00 on Friday. NKE gapped down in the latter part of March and closed at 53.92 on March 22nd on extremely heavy volume. That set a major price support level as NKE had not closed beneath 54.00 (except for that March 22nd close) since breaking out above that level in the second week of February. The following shows key support running through the 54.00 level. Check it out:
A close beneath 53.75 would be a signal worth paying attention to. Relative support (vs. the S&P 500) near .0224 is being challenged after a steep selloff. Breaking down beneath both the relative support level and the absolute price support level - all on high volume - would likely set NKE up for further deceleration. Stay tuned.
There are many opinions in the market and that is what makes the market so interesting. Without question one of the perplexing areas of the market has been the 10 Year Treasury Yield for a lot of investors. With the Federal Reserve looking like it wants to increase interest rates at the next meeting, I thought it would be timely to check in on the Bond Yield chart.
While the US Yield has been dropping since the first of the year, it has caught a lot of the major participants off guard. But US investors are not alone. The British and Japanese charts also sport lower yields since the first of the year. Only Germany is holding a higher yield in April over January 1.