Video and Report Headlines
Broad Market Analysis
- SPY Uptrend and Support
- QQQ Uptrend and Support
- Small-caps Remain Serious Laggards
- S&P MidCap 400 SPDR Nears 200-day SMA
- 50+ Percent of S&P 500 Stocks Below 200-day SMAs
- Risk-Off Prevails since July
Chart Analysis, Setups and Trading Ideas
- 20+ Yr Treasury Bond ETF (TLT)
- Technology SPDR (XLK)
- Semiconductor ETF (SOXX)
- ARK Innovation ETF (ARKK)
- ONEOK (OKE)
- PG&E Corp (PCG)
- Exelon (EXC)
The next Chart Trader will be posted on Tuesday, September 19th.
Key Levels for SPY and QQQ
There are no changes in the broad market conditions. SPY and QQQ are in short-term uptrends and their breakouts held as both bounced over the last four days. These bounces affirm short-term support and keep the short-term uptrends alive. I remain focused on these short-term uptrends because they could be corrective bounces after sharp declines in August. Short-term reversals at this stage would signal a continuation of the August declines and target further weakness towards long-term support zones. This is not a prediction, but rather a scenario to consider should SPY and QQQ reverse their short-term uptrends.
Small-caps Remain Serious Laggards
Mid-caps (MDY) and small-caps (IWM) are seriously lagging, both long-term and short-term. IWM just closed below its 200-day SMA. I would, however, not read too much into this “signal” because IWM is a whipsaw machine. Backtests results for the 200-day cross were not good (buy a cross above the 200-day and sell a cross below the 200-day). Since 2003, there were 22 winners (23.66%) and 71 losers (76.34%). The Compound Annual Return was a meager +2.01% and the Maximum Drawdown was a whopping -38.23%. Ouch.
S&P MidCap 400 SPDR Nears 200-day SMA
The 200-day SMA works as a reference point to compare performance. SPY and QQQ are well above their rising 200-day SMAs (leading). In contrast, IWM is below and MDY is less than 1% above its 200-day SMA. IWM and MDY are clearly not as strong as SPY and QQQ. Short-term, MDY and IWM fell sharply last week and continued lower this week. The red lines mark short-term resistance and upside breaks are needed to revive the bulls.
50+ Percent of S&P 500 Stocks are in Long-term Downtrends
Weakness in small-caps and mid-caps is reflected in S&P 500 breadth. Only 47.11% of S&P 500 stocks are above their 200-day SMAs, which means more than 50% are below. Fewer than 35% of S&P 500 stocks are above their 50-day SMAs. Again, SPY bounced the last 18 days (+2.4%), but the breadth indicators actually deteriorated and this means fewer stocks are participating in the bounce.
Risk-Off Prevails since July
The next chart shows the S&P 500 High Beta ETF (SPHB) in the top window the S&P 500 Low Volatility ETF (SPLV) in the middle window and the ratio of the two in the lower window. SPHB represents the risk-on trade, SPLV covers the risk-off trade and the ratio captures the bias. In general, SPHB has been trending higher since late December and SPLV has been trending lower. This is a bullish dynamic because it shows an appetite for risk.
The lower window captures the swings between risk-on (green arrows) and risk-off (red arrows). The SPHB/SPLV ratio rises when high-beta outperforms low-volatility (risk-ON) and falls when high-beta underperforms low-volatility (risk-OFF). Notice how the ratio rose from late December to early February and from mid May to mid July. Stocks rose sharply during these two periods. The ratio peaked in July and is currently falling, which means risk is currently OFF.
The market looks vulnerable to a downturn, but we have yet to see the big two break down (SPY, QQQ). Support is not broken until it’s broken. The big boys are holding up, but small-caps and mid-caps are under pressure. Breakdowns in SPY and QQQ would be quite negative because price action would then be aligned with negative seasonality (September).
Chart Analysis, Setups and Trading Ideas
