The major index ETFs hit new highs in March, but trading has been relatively flat the last two weeks. Even though the uptrends are firmly in place, flat trading indicates that the market may be moving into corrective mode. As we have seen this year, it is hard to time a correction. The AD Lines and AD Volume Line hit new highs this month and remain overextended. Net New Highs remain firmly positive. The defensive and offensive sectors are performing well and small-caps continue to lead large-caps. In short, the bulk of the technical evidence remains bullish.
- AD Lines: Bullish. The Nasdaq and NYSE AD Lines hit new highs last week and remain in uptrends overall. Both, however, are overextended and ripe for a corrective period.
- AD Volume Lines: Bullish. The Nasdaq and NYSE AD Volume Lines hit news highs last week and then pulled back. Both are in uptrends, but also ripe for a corrective period.
- Net New Highs: Bullish. Net New Highs remain strong and the cumulative Net New Highs lines moved to new highs.
- 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 this week, but from low levels and both remain well below 20%. A move above 20% would break the February high.
- Trend-Structure: Bullish. DIA, IWM, MDY, QQEW and SPY all hit new 52-week highs this month, but have been range bound for two weeks. The bulls may be getting a little fatigued.
- SPY Momentum: Bullish. RSI and MACD(5,35,5) pulled back from high levels, but remain bullish overall (above 50 and above zero). The Aroon Oscillator is above +50.
- Offensive Sector Performance: Bullish. Consumer staples and healthcare are the two strongest sectors. However, the consumer discretionary sector is performing well and the finance sector the third best performing sector on a three month basis.
- Nasdaq Performance: Bearish. The $COMPQ:$NYA ratio edged higher the last seven weeks, but this is not enough to reverse the six to seven month downtrend.
- Small-cap Performance: Bullish. The $RUT:$OEX ratio rebounded in March and moved to a new high this month.
- Breadth Charts (here) and Inter-market charts (here) have been updated.
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is
not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise).
We all need to think for ourselves when it comes to trading our own accounts. First, it is
the only way to really learn. Second, we are the only ones responsible for our decisions.
Think of these charts as food for further analysis. Before making a trade, it is important
to have a plan. Plan the trade and trade the plan. Among other things, this includes setting
a trigger level, a target area and a stop-loss level. It is also important to plan for three
possible price movements: advance, decline or sideways. Have a plan for all three scenarios
BEFORE making the trade. Consider possible holding times. And finally, look at overall market
conditions and sector/industry performance.
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.
Learn More
