Stocks were hit with some selling pressure this week, but the bigger trends are unaffected and remain up. The market is split with pockets of weakness and pockets of strength. The consumer discretionary is lagging with a four week low, while the technology sector is leading with a new high this week. Large-caps are lagging as DIA failed to take out its December high, but small-caps are leading as IWM hit a new high this week. Despite these splits, the bulk of the evidence remains bullish.
- AD Lines: Bullish. The Nasdaq and NYSE AD Lines hit new highs in January and remain in clear uptrends.
- AD Volume Lines: Bullish. The Nasdaq and NYSE AD Volume Lines also hit new highs in January.
- Net New Highs: Bullish. The cumulative Net New Highs lines for the Nasdaq and NYSE hit new highs this week. New highs continue to easily outpace new lows on both exchanges.
- Bullish Percent Indices: Bullish. All nine sector Bullish Percent Indices are above 50%. The Energy BPI ($BPENER) is the weakest at 52%.
- VIX/VXN: Bullish. The S&P 500 Volatility Index ($VIX) and Nasdaq 100 Volatility Index ($VXN) bounced this week, but remain near the low end of their twelve-month ranges.
- Trend-Structure: Bullish. SPY, IWM, QQQ and MDY Hit New Highs in January and remain in long-term uptrends. DIA continues to lag because it did not exceed its December high, but also remains in a long-term uptrend.
- SPY Momentum: Bullish. RSI has been in its bull zone (40-80) since mid September and MACD(5,35,5) has been positive since early October. The Aroon Oscillator surged above +50 last week.
- Offensive Sector Performance: Bullish. XLY continues to lag and this is a concern. XLF got hit hard on Thursday and moved to its lowest level of the month. XLI and XLK are holding up well.
- Nasdaq Performance: Bullish. The $COMPQ:$NYA ratio hit a new high this month as the Nasdaq continues to outperform the NY Composite.
- Small-cap Performance: Bullish. The $RUT:$OEX ratio is near its September high and small-caps are outperforming large-caps.
- 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.
