With big moves over the last three weeks, the indicator summary improved since its last tally (21-June). The AD Volume Lines hit new highs, the Nasdaq AD Line hit a new high and Net New Highs surged. The finance and consumer discretionary sectors are leading the nine sectors. Even though the Nasdaq is showing relative strength, large-cap techs are lagging because the Technology SPDR (XLK) has yet to break its May high. Stocks are now short-term overbought after big runs the last four weeks. Even though the bulk of the evidence is bullish, overbought conditions could give way to a corrective period in the coming weeks.
- AD Lines: Bullish. The Nasdaq AD Line surged to a new high this month. The NYSE AD Line also surged, but has yet to clear its May high.
- AD Volume Lines: Bullish. The NYSE and Nasdaq AD Volume Lines surged to new highs this month.
- Net New Highs: Bullish. After dips into negative territory last month, Net New Highs for the Nasdaq and NYSE surged back above +10 percent in July.
- Bullish Percent Indices: Bullish. All nine BPIs are above 50%. The Materials BPI ($BPMATE) is the weakest at 56.67%.
- VIX/VXN: Bullish. The S&P 500 Volatility Index ($VIX) and the Nasdaq 100 Volatility Index ($VXN) plunged back below 15%. I will now set a big resistance zone based on the 2013 highs.
- Trend-Structure: Bullish. The major index ETFs moved to 52-week highs this month.
- SPY Momentum: Bullish. RSI broke below 40 in June, but surged back above 65 this week. MACD(5,35,5) is positive and the Aroon Oscillator is back above +50.
- Offensive Sector Performance: Bullish. The Consumer Discretionary SPDR (XLY) and the Finance SPDR (XLF) are leading the market higher and showing relative strength. The Industrials SPDR (XLI) is also performing well with a 52-week high. The Technology SPDR (XLK) is lagging and hitting resistance near its May high.
- Nasdaq Performance: Bullish. The $COMPQ:$NYC ratio moved to a new high for 2013 as the Nasdaq exceeded its May high.
- Small-cap Performance: Bullish. The $RUT:$OEX ratio moved to a new 52-week high as small-caps led the market higher.
- Breadth charts (here) and intermarket 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.
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