The major index ETFs and indicators took hits this week, but there is no change in the overall picture. The major index ETFs, AD Lines and AD Volume Lines hit multi-month highs this month and pulled back sharply this week. Stocks were quite overextended after big moves from mid November to mid February and ripe for some sort of corrective period, which could evolve as an extended pullback or consolidation. I am concerned with the inter-market picture because the Dollar is surging and oil is falling. This is typical for a risk-off environment, but we have yet to see an upside breakout in treasuries. A bullish breakout in the third, and perhaps most important, risk-off asset would be negative for stocks.
- AD Lines: Bullish. After a big surge from mid November to mid February, the Nasdaq AD Line pulled back sharply this week. The NYSE AD Line hit a new high last week and also pulled back sharply this week. The trends are still up, but a correction could be unfolding.
- AD Volume Lines: Bullish. The Nasdaq and NYSE AD Volume Lines hit new highs last week and then fell sharply this week. The trends are still up, but a correction could be unfolding.
- Net New Highs: Bullish. After remaining at high levels the prior seven weeks, Net New Highs fell sharply this week. Nevertheless, we have yet to see new lows exceed new highs and this indicator remains bullish overall.
- Bullish Percent Indices: Bullish. All nine sector Bullish Percent Indices are above 50%.
- VIX/VXN: Bullish. The S&P 500 Volatility Index ($VIX) and the Nasdaq 100 Volatility Index ($VXN) surged with big moves over the last two days, but remain in downtrends overall and below 20%.
- Trend-Structure: Bullish. IWM, SPY, MDY, QQEW and DIA hit new 52-week highs earlier this month and then pulled back sharply the last two days. Stocks were quite overextended after big moves from mid November to mid February and ripe for a correction.
- SPY Momentum: Bullish. RSI plunged from 70+ and broke its early February low. A momentum downtrend could be starting. MACD(5,35,5) is below its signal line, but in positive territory and the Aroon oscillator remains above 50. Medium-term trouble starts if/when the Aroon oscillator plunges below -50.
- Offensive Sector Performance: Bullish. XLY, XLF and XLI hit new 52-week highs earlier this month and then pulled back sharply the last two days. All three were quite overextended after big moves from mid November to mid February and ripe for a correction.
- Nasdaq Performance: Bearish. The $COMPQ:$NYA ratio has been trending lower since early September and hit a 52-week low in late January.
- Small-cap Performance: Bullish. The $RUT:$OEX ratio fell sharply the last few days, but remains in an uptrend overall.
- Breadth Charts (here) and Inter-market charts (here) have been updated.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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