Breadth for Trading Bias and Oversold Conditions – Industrials and Aero/Defense

Commodities remain strong as a group. Oil is trading near new highs as the 12-month Oil Fund extends on its triangle breakout. Copper is consolidating near a 52-week high, the DB Agriculture ETF hit a new high and gold broke out in early August. Perhaps even more telling, middle distillates, such as heating oil and diesel are trading near new highs. $USL $USD $GLD $CPER $DBB $SRUUF $DBA

Even though the weight of the evidence remains bullish for stocks, there are some sizable pockets of weakness in key areas. This weakness is exacerbated by strength in the energy sector, which is not the sector we want to see leading the market. The Energy SPDR hit a new high this week as the 12-month Oil Fund exceeded its summer highs. $XLE $XLK $IEF $UST10Y $JNK $XLY $XLC $ITB

The weight of the evidence remains bullish for stocks, but the macro picture is mixed as rates continue to rise, oil prices remain high and September seasonal patterns loom. Small-caps fell over the last two weeks as breadth weakened, while QQQ and XLK successfully defended their wedge breakouts. The Semiconductor ETFs are struggling and I am raising my re-evaluation levels for some of the AI ETFs. $UST2Y $UST10Y $USL $SPXA200R $SPXHLP $SPY $QQQ $XLK, $SMH $SOXX $DRAM $AIQ $ARTY $DTCR $IDGT $UFOX $IYZ $BLOK

Led by weakness in the Aerospace & Defense ETF, the Industrials SPDR took a hit in the second half of August. Despite this hit, both ETFs are in long-term trends and setting up after short-term pullbacks. Attention then turns to bullish setups in three Aerospace & Defense stocks: GE Aerospace, Lockheed Martin and Howmet. $XLI $ITA $GE $LMT $HWM

The Home Construction and Homebuilders ETFs are lagging over the past year, but they caught fire in May-June with outsized moves and higher highs. These moves could signal the start of trend reversals. Both ETFs formed bullish continuation patterns and I am watching for breakouts. We will also look at the 10yr Yield, its correlation housing and three stocks. $ITB $XBH $UST10Y $XLRE $XLU $TAN $PHM $TOL $HD

Despite some concerns with seasonal patterns and rising rates, the weight of the evidence remains bullish for stocks. The Technology SPDR, Nasdaq 100 ETF, Semiconductor ETFs and AI-adjacent ETFs broke out with surges in early August. These ETFs pulled back over the last five days and many are testing their breakout zones. Failure to hold these breakouts would be negative and could weigh on the broader market. $SPY $QQQ $XLK $SMH $SOXX $DRAM $EWY $AIQ $ARTY $DTCR $IDGT $UFOX $IYZ

The Treasury announced a plan to increase its support for the bond market. Wednesday’s announcement put a bid in bonds, weighed on the Dollar and lifted gold. The US Dollar Index extended its breakdown as gold extended on its breakout. Elsewhere, I am seeing bullish setups in the Blockchain Tech ETF and the Physical Uranium ETF. $IEF $UST10Y $USD $GLD $BLOK $URA $SRUUF

There is broad strength within the Healthcare sector because over 80% of its stocks are in long-term uptrends. This is also true for Energy and Finance. The Healthcare SPDR and Biotech ETF confirm strength with both hitting new highs this week. Within these groups, I see a flag breakout in Eli Lilly and a steady uptrend in Biogen. $XLV $IBB $LLY $BIIB

The stock market remains in bull mode, but traders should be prepared for the possibility of a correction or pullback. It has been 91 days since the last 5% drawdown and seasonal headwinds are around the corner. SPY, QQQ, XLK and the AI ETFs broke out with surges in early August. It is important that these breakouts hold. Today’s report will set the key levels to watch. $SPY $QQQ $RSP $XLK $SMH $SOXX $DRAM $AIQ $ARTY $DTCR $IDGT $UFOX $IYZ

Today’s report starts off with the bond ETFs because bonds are in long-term downtrends and interest rates are in long-term uptrends. These trends have yet to affect the stock market, but certain groups could face headwinds. Attention then turns to the breakouts in gold and gold miners, and then the setups agriculture and agribusiness. $TLT $IEF $UST10Y $UST20Y $GLD $GDX $DBA $MOO

The Technology SPDR accounts for 37.5% of the S&P 500, which makes it the biggest sector in the S&P 500, by far. Finance is a distant second at 12.3%. Semiconductors account for around 45% of the Technology sector, which suggests that semiconductors account for around 16% of the S&P 500, more than the Finance sector. Semiconductors are a major force in the market-cap weighed universe. With that in mind, today’s report will focus on semiconductors, memory and AI. $SMH $SOXX $DRAM $EWY $MU $SNDK $STX $AIQ $ARTY $DTCR $IDGT $UFOX $IYZ

Today’s report starts with the broad market ETFs and then dives into energy. Oil surged the last three days and could be forming a bullish triangle. Energy ETFs are leading as the Energy SPDR broke out on a long and short term basis. Analysis extends into ETFs related to oil services, exploration & production, natural gas and MLPs. $SPY $RSP $QQQ $XLK $USL $XLE $OIH $XOP $FCG $AMLP

The stock market continues to click on all cylinders with ETFs related to small-caps, mid-caps and equal-weight hitting new highs. QQQ and XLK are not far behind after big breakout moves the last four days. Today’s report focuses on the biotech ETFs as they forge short-term setups after new highs. With biotech, Gilead recaptured its 200-day SMA and Vertex is firming in a Bullish Setup Zone. $IBB $XBI $GILD $VRTX

Large-caps led the market over the last three days with SPY breaking triangle resistance. QQQ also surged, but remains just short of a breakout. Today’s report focus on the Technology SPDR and the ETFs in the AI stack. These include semiconductors, broad AI, data center REITs and connectivity. $SPY $QQQ $XLK $AIQ $ARTY $SMH $SOXX $IDGT $DTCR $IYZ $UFOX