.... Transport ETF Bounces off Key Retracement
.... Airline ETF Returns to Breakout Zone
.... Railroad Stocks are in Uptrends
.... XSD Bounces of Support
.... Diodes and Skyworks Turn Up
.... Microsoft, Facebook and Apple Lead the Fab Five
.... Pfizer Shows Good Volume Trends
.... Thor Surges off Gap Zone ....
Transport ETF Bounces off Key Retracement
I don't follow the Transport iShares (IYT) too closely because it is such a hodge-podge of transportation-related stocks and it is price weighted. The chart below shows IYT with the top ten stocks (symbol, weighting and price). FDX is by far the highest priced stock and it accounts for over 13% of the ETF. Together with UPS, these two air-land delivery companies account for over 20% of the ETF. NSC, UNP and KSU are railroads and these three account for anther 20%.
The chart shows a classic breakout and throwback over the last few months. IYT broke out of a wedge correction in early June and fell back to the breakout zone in late July. This zone also marks a 61.8% retracement of the May-July advance. The ETF found support in the 165 area twice in the last three weeks and surged off support the last two days. It looks like the storied Transports are turning up again.
Airline ETF Returns to Breakout Zone
The Airline ETF (JETS) is still at an interesting juncture (potential reversal zone). The ETF is clearly in a long-term uptrend with a new high in July. The decline over the last few weeks was sharp in percentage terms, but still within the confines of a normal correction or pullback within an uptrend. Notice that broken resistance turned support and the pullback retraced 61.8% of the prior advance. These two combine to mark a potential reversal zone after this pullback.
Railroad Stocks are in Uptrends
The next chart shows five railroad stocks bouncing off support zones over the last two weeks (small green parabolas). All five are above their 200-day EMAs with UNP moving back above on Monday.
XSD Bounces of Support
I highlighted a potential double top in the Semiconductor SPDR (XSD) in the Weekly Market Review & Outlook on Friday. There are certainly two peaks in the 67 area and clear support zone around 61. Keep in mind that a double top is not a DOUBLE TOP until it is confirmed with a support break. Also keep in mind that XSD is in an uptrend with a 52-week high in June, the technology sector is leading the market and we are in a bull market. XSD hit the support zone and became oversold last week as RSI edged below 30. The ETF bounced on Monday to affirm support in the 61 area. The double top is still possible, but clearly not confirmed.
Diodes and Skyworks Turn Up
Within the semiconductor group, I am seeing bullish price action in Diodes (DIOD) and Skyworks (SKYW). The first chart shows DIOD with a high volume surge to resistance. I am a bit hesitant to call this resistance because the trend is up and higher highs are expected in an uptrend. Thus, a breakout should not come as a big surprise. An inverse head-and-shoulders of the continuation variety formed from mid May to August and a breakout at 27.5 would target a move to the low 30s.
The second chart shows SKWS with a correction, breakout and throwback to the breakout zone. The breakout zone turned into support around 100 as the stock bounced over the last two days.
Microsoft, Facebook and Apple Lead the Fab Five
Three of the five largest stocks in the Nasdaq 100 ETF (QQQ) are performing well and this bodes well for large-cap tech stocks. The sixth largest stock in QQQ, Comcast, is also performing well, but it only weighs in at 2.93% of the ETF. The chart below shows Facebook with a tight consolidation near a 52-week high, Apple with a 52-week high last week and Microsoft breaking out of a small wedge the last two days. These three are the closest to their 52-week highs (within 3%) and the strongest of the five.
Alphabet and Amazon are lagging the other three, but they are at support and showing signs of life. GOOGL is finding support in the low 900s from the late April gap and early July low. AMZN is finding support in the 950 area from the June-July lows. Sustainable bounces in these two would benefit QQQ immensely.
Pfizer Shows Good Volume Trends
Pfizer is up around 5.5% year-to-date and sports a choppy uptrend over the last seven months or so. There are three surges since February and each surge shows a nice jump in upside volume (green bars). Most recently, PFE broke out of a wedge correction with a surge above 33 and then fell back to this breakout area with a throwback. This looks like a normal pullback and I would expect the uptrend to resume at some point. Watch 33.6 for a mini breakout and signal.
Thor Surges off Gap Zone
Thor Industries, maker of RVs, broke out with a big gap and surge in early June. This breakout and gap zone turned into support and held in July-August. A consolidation formed over the last two months and the two-day surge off the support zone is the first sign that we will see a breakout. The indicator window shows MACD hitting the zero area and starting to turn up.
And Finally, a few Words from Tony Dwyer
I don't watch CNBC or Bloomberg live, but I do scroll through their videos and watch select analysts. Tony Dwyer, the equity strategist for Canaccord Genuity, recently discussed the broad market environment and the possibility of a correction. (Art's Comment: it seems that the majority of pundits are looking for a correction and the market rarely appeases the majority).
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--Arthur Hill CMT
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