Video and Report Headlines
Vacation and Educational Reports/Videos
- Plenty of Stocks above their 200-day SMAs
- Nasdaq 100 Leads with 26-wk Highs
- 4wk High-Low Percent is Bullish, but Mixed
- SPY and QQQ Hit New Closing Highs
- TLT Holds Breakout as Yields Fall
- Home Construction ETF Corrects within Uptrend
- Four Homebuilders with Bullish Patterns
- SuperMicro and Dell Turn Up
The next Chart Trader will be posted on Thursday morning, June 20th.
The weight of the evidence is bullish for large-caps and large-cap techs. SPY represents large-caps and QQQ represents large-cap tech stocks. Even though there are 1000s of “other” stocks out there, these stocks represent the 800 pound gorilla in the market. As such, I am finding it more and more important to focus on S&P 500 and Nasdaq 100 breadth, as opposed to the S&P 1500. The latter includes the S&P MidCap 400 and S&P SmallCap 600. Today’s report starts with long-term and short-term breadth analysis for the S&P 500 and Nasdaq 100. We then turn to the breakout in bonds, the breakdown in the 10yr Yield and bullish patterns in some housing stocks. The AI trade remains in play so we will finish with two data center stocks.
Vacation and Educational Reports/Videos
Note that I will be on a family vacation the first two weeks of July. I will not publish the ChartTrader reports from July 1st to July 14th. Instead, I will publish two educational reports and videos.
- 2-July: Quantifying Market Conditions with NDX/SPX Breadth
- 9-July: Absolute Trends, Relative Trends and Trend Consistence
For SystemTrader, I will update the weekend signals for the Nasdaq 100 and S&P 500 Dual Momentum Rotation Strategies during the vacation (Saturdays). I will also update the signals for the ETF Trend-Momentum Profit Target Strategy.
Plenty of Stocks above their 200-day SMAs
The chart below shows the percentage of stocks above their 200 day SMAs for the S&P 500 and Nasdaq 100. A stock is in a long-term uptrend when above its 200-day SMA. I mostly focus on stocks in the S&P 500 and Nasdaq 100 for trading. Thus, it makes sense to focus on breadth for these two. %Above 200-day SMA turns bullish with a move above 60% (green arrows) and stays bullish until a move below 40% (red arrows). NDX %Above 200-day turned bullish on 27-Jan-2023 and remains bullish. SPX %Above 200-day turned bullish on 1-Dec-2023. Both are currently near 65%, which is enough to support the bull market.
Nasdaq 100 Leads with 26-wk Highs
The next chart shows 26-wk High-Low Percent for the S&P 500 and Nasdaq 100. This indicator turns bullish with a cross above +20% and bearish with a cross below -20%. SPX 26wk HiLo% turned bullish on 13-Dec-2023 and NDX 26wk HiLo% turned bullish on 31-Mar-2023. Again, we see the Nasdaq 100 turning bullish sooner and NOT turning bearish during the September-October decline. Most recently, NDX 26wk HiLo% surged to 15.84% on Monday as Nasdaq 100 stocks again led the market. QQQ and SPY are at new highs, but these indicators have not exceeded +20% since March. Fewer stocks are partaking in the large-cap AI driven advance, but these indicators are not bearish. They simply show less upside participation. Trouble starts if/when we start seeing double digit negative numbers.
4wk High-Low Percent is Bullish
The next chart shows 4wk High-Low Percent for the S&P 500 and Nasdaq 100. These indicators are for short-term trend timing. An uptrend signals when BOTH exceed +30% and a downtrend signals when BOTH break below -30%. The red and green shadings show the current signals for each index. A bullish signal triggered on May 15th when both surged above +30%. SPX 4wk High-Low Percent plunged below -30% on May 29th and turned bearish. This signal has yet to be confirmed by NDX 4wk High-Low Percent. Thus, the combo signal remains bullish. A plunge below -30% on NDX HiLo% would turn the indicator combo bearish and argue for a correction in the broader market.
SPY, QQQ and MAGS Hit New Highs
SPY gained .80% on Monday to record another new high. There is no setup or change on this chart. The long-term trend is up because SPY is above its rising 200-day and the 5/200 %Differential is at +12.60% (bottom window). The last setup was the correction into early May and the last signal was the early May breakout. With another extension higher, the ATR Trailing Stop rose to 537.24 (green line).
QQQ gained 1.2% on Monday and also finished at a new high. As with SPY, the long-term trend is up because QQQ is above the rising 200-day SMA and the 5/200 %Differential is at +15.86%. The last setup was the pullback into early May and the last signal was the early May breakout. With the new high, the ATR Trailing Stop rose to 470.99 (green line). The middle window shows the QQQ/RSP ratio hitting another new high as QQQ leads the average stocks in the S&P 500 (S&P 500 EW ETF (RSP)). Large-caps and large-cap techs are still the place to be.
The next chart shows the Mag7 ETF (MAGS) with a similar profile. The long-term trend is up because price is above the rising 200-day and the 5/200 %Differential is at +25.27%. MAGS broke out on April 26th, which was a week before QQQ and SPY. The ETF extended higher the last few weeks and the ATR Trailing Stop rose along with price. It is currently at 42.95 (green line).
Chart Analysis, Setups and Trading Ideas
The following charts show price bars with the 200-day SMA (red line), the 50-day SMA (green line), the price-relative (ITB/RSP ratio) with the 200-day SMA and the percentage difference between the 5 and 200 day SMAs. On the price chart, I am looking for tradable pullbacks within a bigger uptrend or bullish consolidation patterns. With the price-relative, I am looking for relative strength. The price-relative (ITB/RSP ratio) rises when the ETF or stock outperforms. And finally, the percentage difference between the 5 and 200 day SMA is bullish (long-term uptrend) with a move above 3% and stays bullish until a move below -3%. This basically measures the tide or long-term bias.
TLT Holds Breakout as Yields Fall
The 20+ Yr Treasury Bond ETF (TLT) extended higher last week as the market reacted positively to the Fed, CPI and PPI. Overall, the channel breakout signals a continuation of the prior 22% advance and targets a move toward the 108 area (green dashed line extension). This is not by any means a “HARD” target. It will remain a target as long as the breakout is valid. Overall, the falling channel was a correction after the 22% advance. TLT broke the channel line, short-term resistance and the 200-day SMA here in June. With last week’s move above 94, I will raise my re-evaluation level to 90. A close below this level would negate the breakout.
The next chart shows the 10-yr Treasury Yield ($TNX) with a mirror image of TLT. Yields fall when bonds rise. $TNX broke channel support and this signals a continuation of the prior decline. I am targeting a move towards the 3.5% area. With a sharp decline last week, I am lowering my re-evaluation level to 4.5%. A break back above this level would negate the breakdown.
Home Construction ETF Corrects within Uptrend
It is easy to suggest that a decline in the 10-yr Treasury Yield would be bullish for housing (lower mortgage rates). However, I do not want to get caught up into one narrative. There are dozens of fundamental factors affecting the market, the Consumer Discretionary sector and the housing industry. I find it best to put narratives on the back burners and focus on price. Our P&L is based on price action, not mortgage rates.
The chart shows Home Construction ETF (ITB) in a long-term uptrend. Price is above the rising 200-day SMA and the 5/200 %Differential is at +7.74%. This means the 5-day SMA is 7.74% above the 200-day SMA. On the price chart, ITB advanced 63% and recorded a new high in early April. It then corrected with a falling wedge into June. Notice that price is finding support from the December-February consolidation (blue shading). The 33% retracement line is also in the neighborhood. Overall, I would call this a Support-Retracement Zone. This is an area that could give way to a reversal and a continuation of the bigger uptrend.
The falling wedge pattern is also typical for corrections after big advances. For an early jump, I am watching the swings within the falling wedge. The current swing is down and I am marking resistance at 107 (red line). A close above this level would trigger a short-term breakout and increase the chances of a bigger wedge breakout. The middle window shows the ITB/RSP ratio in a long-term uptrend and medium-term downtrend. ITB is underperforming since April. A break above the 50-day SMA and red trendline would show a return to relative strength.
Four Homebuilders with Bullish Patterns
The next chart shows Lennar (LEN), Toll Brothers (TOL), KB Home (KBH) and Pulte (PHM) with bullish continuation patterns and key levels to watch.
SuperMicro and Dell Turn Up
Dell Technologies (DELL) and SuperMicro (SMCI) are part of the data center trade, which is part of the AI trade. They are both high-flyers that corrected recently and turned up sharply on Monday. The first chart shows SMCI with a breakout on May 15th and a pullback towards the low just before the breakout (green line). Note that SMCI was featured on May 14th. Upon a breakout, I usually set a re-evaluation level using the low just before the breakout. A close below this low would then negate the breakout. SCMI fell back to this low and dipped below intraday, but never closed below it. The bounce over the last four days reinforces support here and keeps the breakout alive. Overall, I view the falling channel as a correction that retraced half of the prior advance. This breakout signals a continuation of the bigger uptrend and new highs are expected. A close below 762 would call for a re-evaluation. This is a high flyer with above average risk. Caveat Emptor!
The next chart shows DELL with a monster move here in 2024. Even with the gap down and sharp decline in May, the stock is up over 80% year-to-date. DELL fell back to the rising 50-day SMA after an earnings report. The stock firmed for two weeks and then broke short-term resistance with a surge on Monday. This breakout signals an end to the short correction and a resumption of the bigger uptrend. A close below 131 would call for a re-evaluation. This is also a high flyer with above average risk. Caveat Emptor!
