- Large-Techs and Small-Caps Still Leading.
- QQQ Bounces as IJR Flags.
- Junk Bonds and International Indexes.
- Charts Worth Watching.
- On Trend on Youtube.
....QQQ and IJR Still Leading Year-to-Date...
...The major index ETFs are in long-term uptrends and short-term downtrends. There is no denying the long-term trend because we saw fresh 52-week highs in several major index ETFs over the last few weeks (SPY, QQQ, IJR, MDY). Note that the S&P SmallCap iShares (IJR) and the Nasdaq 100 ETF (QQQ) are still the leading gainers year-to-date with advances of 16.7% and 18%, respectively.
Stocks pulled back over the last week or so with QQQ leading the pullback. So far, the pullback has been rather mild for SPY, IJR and MDY because they are down 1% or less. Selling pressure in the broader market has not been intense. QQQ is down around 2% over the last eight trading days and was the only one to notch a short-term oversold reading.
I know it is September and I realize that October is around the corner, but the overall picture for US stocks remains bullish. XLI is starting to lead, XLF is holding up and XLV is resting after a big advance. XLK and XLY are still the overall leaders and in uptrends. The broader market can continue grinding higher as long as the majority of the big sectors remains bullish.
QQQ Bounces as IJR Flags
The next charts show QQQ and IJR with the Chandelier Exit (22,1) and RSI(5). First, as noted in the Weekly Market Review, QQQ fell sharply last week and RSI dipped below 30 to become oversold for the first time since late July. RSI turned up and moved above 30 for a short-term bullish signal. QQQ formed an outside reversal on Tuesday and this could lead to a short-term bounce.
The next chart shows RSI hitting 30.86 for IJR. Thus, the ETF did not become short-term oversold. Note that SPY and MDY did not become short-term oversold either. On the price chart, IJR has a bull flag working and a breakout at 90 would open the door to new highs. See this System Trader article for more details.
Notes from On Trend
Tuesday's show, On Trend, started out with some risk ratios and a few international indexes. First, I showed that the SPY:IEF ratio is in an uptrend and this shows a preference for stocks (risk) over bonds (safety). Second, I showed that the JNK:IEF ratio is also in an uptrend and this shows a preference for riskier junk bonds over safer Treasuries. This appetite for risk is bullish for stocks.
For the international indexes, the German DAX Index ($DAX) is down over 7% year-to-date, the Shanghai Composite ($SSEC) is down around 20% this year and the Emerging Markets Index ($MSEMF) is down around 12%. What does this tell us about the US stock market? Absolutely nothing because the S&P 500 is up 8% this year.
As I have said time and time again, analyze the US indexes and breadth indicators for clues on the US markets. Go straight to the underlying index and forget the seemingly related indexes. Any problems or weakness in the US markets will show up on the breadth indicators and price charts. So far, I do not see any warning signs.
Charts Worth Watching
On Trend on Youtube
Available to everyone On Trend with Arthur Hill airs Tuesdays at 10:30AM ET on StockCharts TV and repeats throughout the week at the same time. Each show is then archived on our Youtube channel.
Topics for Tuesday, September 11th:
- Stocks Still Outperforming Bonds (TLT, 2-yr Yield)
- DAX, Shanghai and EEM Weigh on World (sans USA)
- XLI, XLP and XLU Lead in September (plus sectors)
- Industry Group ETFs (IBB, HACK, AMLP...)
- NOT On Trend (ITB, XES, XME, SLX…)
- Q&A: Scanning for Strong Downtrends and Setting Profit Targets
- Stocks to Watch: Two BBand Squeezes (BAC, JPM)
- Click here to Watch
Questions, Comments or Feedback?
I cannot promise to response to all correspondence, but I will read it and take into under consideration. I greatly appreciate all feedback because it helps me improve the commentary and provides ideas for the future. Sorry, I do not take symbol requests.
Plan Your Trade and Trade Your Plan.
- Arthur Hill, CMT
Senior Technical Analyst, StockCharts.com
Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill
