 |
.... Small-caps Extend Newfound Leadership Role .... AD Lines Hit New Highs .... RSI Notches another Overbought Reading for SPY .... IJR Continues to Grind Higher .... Tech, Industrials, Healthcare and Materials Lead .... XLI and XLB Extend after Breakouts .... XLF Fully Recovers with Flag Line Break .... XLY Puts Double Top on the Back Burner .... XLE Challenges Summer Highs .... Brent Continues to Lead WTI .... TLT Falls after Hitting Key Fib Level .... Gold Pulls Back as Bonds Dip and Dollar Bounces .... Dollar Gets an Oversold Bounce .... Bitcoin Index Now Available .... Goldman and BofA Turn Up within Consolidations .... Energy and Car Rental Stocks ..... |
----- Art's Charts ChartList (updated September 15th) -----
Small-caps Extend Newfound Leadership Role
Stocks extended the most recent surge, which began on August 18th, with small-caps and mid-caps leading the way. Even though the S&P SmallCap iShares and the S&P MidCap SPDR have yet to hit new highs, they are up the most over the last four weeks. The PerfChart below shows the performance for eight major index ETFs since August 18th. Small-caps (IJR and IWM) are up around 5% and micro-caps (IWC) are up around 6%. This shows a good appetite for risk and is positive for the market overall.
AD Lines Hit New Highs
The advance over the last four weeks has also been quite broad. Notice that the AD Lines for the S&P 500, S&P Mid-Cap 400 and Nasdaq 100 hit new highs. The S&P Small-Cap 600 AD Line fell short of a new high, but the bounce over the last four weeks was the strongest since mid April.
RSI Notches another Overbought Reading for SPY
The S&P 500 SPDR (SPY) extended on its flag breakout and recorded another new high. The breakout zone turns first support to watch at 244. The June-August lows mark key support in the 240-241 area. The indicator window shows RSI moving above 70 for the 12th time since the advance began in November. Note that 10-day RSI has not been below 30 once this year. During a strong uptrend, it is typical for RSI to become overbought on a regular basis and not oversold.
QQQ is lagging somewhat because it hit a 52-week high last week and has yet to exceed this high. I would not read too much into this non-confirmation because the flag breakout is holding and the bigger trend is clearly up. A close below 143 would negate the flag breakout and a close below 140 would reverse the overall uptrend. In a testament to overall strength, notice that RSI has not been below 35 this year. This means the dips in QQQ have been exceptionally shallow.
IJR Continues to Grind Higher
The S&P SmallCap iShares (IJR) led the market down from late July to mid August with a 7% decline and led the rebound with a 5% bounce the last four weeks. Such is the life of small-caps. Overall, IJR remains in a grinding uptrend with a string of 52-week highs since December. The green trend line and last week's low mark upswing support at 68.5. The upswing is solid as long as support holds. In contrast to QQQ and SPY, notice that RSI(10) moved below 30 three times this year. RSI confirms that IJR was not as strong as QQQ and SPY.
Tech, Industrials, Healthcare and Materials Lead
Four of the nine sector SPDRs hit new highs this week (technology, healthcare, materials and utilities). The Industrials SPDR (XLI) is within .22% of a 52-week high and showing renewed vigor this week. Overall, these five sectors account for 54% of the S&P 500 and this is enough to support the bull market. Elsewhere, the Consumer Discretionary SPDR (XLY), Consumer Staples SPDR (XLP) and Finance SPDR (XLF) are 2.5% to 3.2% from 52-week highs (on a closing basis). Thus, even the not-so-strong sectors are close to new highs. The Energy SPDR (XLE) is still around 15% from its 52-week high, but the ETF is 3% above its 50-day EMA and this is the biggest (positive distance) since early January.
XLI and XLB Extend after Breakouts
I am going to start with XLI because it surged four of the last five trading days. The green trend lines define the overall uptrend. Within this rising channel, the blue lines mark falling flag pullbacks or corrections within the uptrend. XLI broke out over the last two weeks and the upper trend line extends to the low 70s over the next few weeks, perhaps months. The summer lows mark support in the 67 area.
The next chart shows XLB hitting a 52-week high on Thursday and moving to the upper line of the rising channel. I would not call this a "hard" resistance level because the overall trend is clearly up. Resistance breakouts are expected in an uptrend because the path of least resistance is up. The upper trend line is just a soft target zone. Note the Dow Dupont (DWDP) is now 25% of the ETF.
The Technology SPDR (XLK) surged off its support zone on August 22nd and hit new highs here in September. The consolidation lows mark the first support zone in the 56.5-57 area. There is a negative divergence working in RSI over the last two months, but I ignore negative divergences when the underlying security is at or near a 52-week high.
The Utilities SPDR (XLU) took a hit as the 20+ YR T-Bond ETF (TLT) fell on Tuesday-Thursday, and then bounced off the green support zone. A break below this support zone would reverse the short-term upswing, but not be enough to reverse the overall uptrend. At this point, I think XLU is entirely dependent on TLT and will move in the same direction as Treasury bonds.
The HealthCare SPDR (XLV) hit a 52-week high on Tuesday and remains the strongest sector in the market right now. The ETF is up around 7% in four weeks and getting a bit extended. However, the upper trend line extends to the mid 80s and the ETF could have one more surge left before correcting. Full disclosure: this soft target is just a guess.
XLF Fully Recovers with Flag Line Break
The Finance SPDR (XLF) plunged below 24 before Irma and surged back above 24.5 immediately afterwards. The ETF broke the flag trend line in the process, but remains short of a resistance breakout at 25. The overall trend is up with the larger rising channel and I expect a breakout because the long-term trend dictates the path of least resistance. Notice that RSI broke out above 50 to trigger a momentum breakout.
XLY Puts Double Top on the Back Burner
The Consumer Discretionary SPDR (XLY) extended its bounce off support and the double top remains on hold. A Raff Regression Channel defines the short-term upswing with support marked at 89. A close below this level would reverse the upswing and put the double top back in play.
XLE Challenges Summer Highs
The Energy SPDR (XLE) is still the weakest of the nine sectors year-to-date, but it is the strongest over the last four weeks. Notice that XLE broke the channel trend line just as RSI was breaking out to its highest level of the year. This move puts XLE near its summer highs and at the first resistance area. The ETF is also short-term overbought after an 8.6% surge. The bottom picking opportunity was in the second half of August. At this point, I think it is prudent to watch for a pullback to the 64-65 area for a second chance.
Brent Continues to Lead WTI
November Brent (^BX17) broke out of a pennant consolidation in early September and moved above its May high this week, and the January trend line. Brent is up over 20% since late June and it looks like this move reversed the downtrend that was in place since January.
The next chart shows November Light Crude (^CLX17) exceeding the January trend line with the first close above $50 since late July. The July highs mark the last important reaction high (peak) and we need a breakout here to fully reverse the downtrend (higher high). Short-term, the wedge breakout ultimately held because crude did not close below 48 and USO did not close below 9.60. These are the first support levels to watch for a failure.
TLT Falls after Hitting Key Fib Level
The 20+ YR T-Bond ETF (TLT) took a hit this week with a decline below 127. The overall trend is still up and this is just short-term noise at this point. Note that TLT was up around 6% from late July to early September. I am aware that this week's decline occurred at the 61.8% retracement level and it is now possible that a rising wedge is taking shape. In other words, this could be just a big counter-trend advance. A close below 124 would break support and reverse the rising wedge advance.
Gold Pulls Back as Bonds Dip and Dollar Bounces
Notice that the Gold SPDR (GLD) fell along with the 20+ YR T-Bond ETF (TLT) this week, and this confirms the strong positive correlation between TLT and GLD. In addition, the US Dollar ETF (UUP) got an oversold bounce. GLD was already quite extended after an 11% advance from 10-July to 8-September. Thus, a pullback or correction was certainly in order at this point. The broken resistance zone around 122-124 marks the first support zone to watch on a pullback.
Dollar Gets an Oversold Bounce
The US Dollar ETF (UUP) hit a 52-week low last Friday and bounced over the last four days. This is just an oversold bounce at this stage with the August highs marking first resistance. An upside breakout in UUP and downside break in FXE would be bullish for the Dollar. Note that large-caps have outpaced small-caps in 2017 and this is partly because of a weak Dollar. A rebound in the Dollar could lead to relative strength in small-caps.
Bitcoin Index Now Available
StockCharts users can now chart the bitcoin Index from the NYSE ($NYXBT). I have no idea if we are in the early, middle or late stages of the bitcoin phenomenon, but I can look at the chart and offer an opinion. The chart below shows bitcoin falling sharply this month and RSI moving below 40 for the fourth time this year. Yes, bitcoin acts just like any other chart because prices are driven by buying and selling pressure. The last bullish signal occurred with the oversold reading and wedge breakout in July. Bitcoin is back in the oversold zone and has almost retraced 50-61.8% of the July-August surge. Thus, chartists should be on alert for support soon and a potential upside reversal.
Chamath Palihapitiya notes that the bitcoin genie is out of the bottle and aint' going back. My Take: Take his words with a grain of salt because he is talking his book (i.e. he is "massively long" bitcoin.
Tom Lee, who is probably not talking his book, thinks bitcoin could hit 25,000 in five years - but not without a lot of volatility. My take: the US Dollar is backed by the "full faith and credit" of the US government, which just exceeded the $20 trillion level for debt. Bitcoin is backed by the full faith and credit of blockchain technology, the digital medium for peer-to-peer value exchange.
Goldman and BofA Turn Up within Consolidations
Her are three analysts with bullish/bearish views on banks. Yes, these are fundamental arguments, but keep this in mind when looking at the charts as XLF goes for a breakout. Of note, Mike Mayo of Wells Fargo Securities notes that investors do not understand just how strong banks are right now. Jeffrey Harte of Sandler O’Neill notes that Goldman Sachs is going to expand its lending business!
Energy and Car Rental Stocks
Chris Verrone of Strategas Research Partners, talks about the impending breakout in Light Crude, the leading breakout in Brent, relative strength in EQT Corp and the strong chart for Chevron.
Adam Jonas of Morgan Stanley notes that car manufacturers are entering the car rental market. Combined with uberization and technical challenges, the business models for Hertz and Avis Budget are seriously flawed.
******************************************************
ETF Master ChartPack - 300+ ETFs organized in a Master ChartList and in individual groups.
Follow me on Twitter @arthurhill - Keep up with my 140 character commentaries.
****************************************
Thanks for tuning in and have a good day!
--Arthur Hill CMT
Plan your Trade and Trade your Plan
*****************************************
