Video and Report Headlines
- Percentage of Stocks Above 200-day Still Mixed
- 10-day EMAs of AD% Fail to Trigger
- ZBT and the Keltner Channel
- QQQ Still Leading, but Very Overbought
- IWM Tags the 200-day SMA
- Equal-weight S&P 500 ETF Hits Reversal Zone
- Semiconductor ETF Hits New High
- Support-Reversal Zones for AMD, AAPL and MSFT
- Regeneron Tests Rising 200-day SMA
Thanksgiving Holiday. I will be off next week to give thanks with family and friends. The next Chart Trader will be posted on Tuesday, November 28th.
Stocks surged the last three weeks and participation broadened, to some degree. Analysts are pointing out the Zweig Breadth Thrust and the massively lopsided Advance-Decline Ratio this week. While there is no denying the powerful upside move since late October, keep in mind that only half of the stocks in the S&P 1500 are above their 200-day SMAs. Half are below. The chart below shows the percentage of stocks above the 200-day SMAs for four major indexes: S&P 500 (49.30%), Nasdaq 100 (66.34%), S&P MidCap 400 (52.26%) and S&P SmallCap 600 (46.31%). The Nasdaq 100 is the only one above 60% and the only one with a solid majority of stocks in uptrends. The rest are split, which means there are still large pocks of weakness within the market.
The blue arrows on the right shows the improvements over the last three weeks. NDX %Above 200-day SMA hit the 40% level in mid October and bounced. The other three were below 25% when they bounced. We need follow through to push these three above 60%.
The next chart shows the 10-day EMA of Advance-Decline Percent for the same four indexes. The green shading on the right shows the Nasdaq 100 indicator surging above 30%, which is a bullish breadth thrust. The blue shading shows the other three failing to exceed +30%. In other words, perhaps short-term breadth is not as strong as some would think. Notice that three of the four surged above 30% in late March (green shading). Stocks then continued higher into July.
ZBT and the Keltner Channel
The S&P 1500 Zweig Breadth Thrust (ZBT1500) is the active signal for the broader market. As the chart below shows, this signal triggered on November 3rd and SPY followed through with a surge above the upper line of the Keltner Channel. The middle line is the 125-day EMA and the channel lines are 2 ATR(125) values above and below. The 5-day SMA crossed above the upper Keltner line and this is also a bullish trend signal.
The red shading shows an upside breakout in mid August that did not work (whipsaw). SPY peaked with this breakout and fell below the lower line. Turning back to the ZBT1500 signal, I would consider it valid as long as the lower Keltner line holds. A 5-day SMA cross below this line would be bearish.
QQQ Still Leading
Even with the big surge this week, the Composite Breadth Model remains bearish (-3). This model uses breadth indicators from the S&P 500 and S&P 1500. The Nasdaq 100 Trend Model, in contrast, remains bullish at +3). This NDX model uses the percentage of stocks above their 100, 150 and 200 day SMAs, the 10-day EMA of AD% and High-Low Percent. It turned bullish in early February and remained bullish throughout. The Nasdaq 100 was the primary driver behind the S&P 500 advance and remains the primary driver.
On the price chart, QQQ broke out of a falling channel and surged to its July high. QQQ is up 12.21% in 14 days and this is the steepest 14-day advance since late January. Sharp advances are double-edged swords. The ability to break out and become overbought shows strong buying pressure (bullish). However, the steepness of the move creates a short-term overbought condition. The August breakout triggered with a 12.63% advance, but did not hold as SPY fell to new lows in October. The early February breakout did not hold either, but QQQ formed a bull flag after this surge and the flag breakout in mid March provided a second chance to partake. For the current breakout, the 370 area marks support from broken resistance. This is the first area to watch for a bounce, should we get a pullback. A close below 370 would negate the breakout and call for a re-evaluation. Perhaps a falling flag would then form.
IWM Tags the 200-day SMA
The next image shows a weekly chart on the left and a daily chart on the right. First, the weekly chart shows IWM tagging a 52-week low four weeks ago and then surging the last three weeks. Overall, the ETF is in a large trading range and the swing within this range is up. IWM is NOT in a long-term uptrend. On the right, IWM broke out of a falling flag with a gap-surge on Tuesday. The ETF tagged its falling 200-day SMA with a high above 181 on Wednesday and then closed below 179. The intraday pop and drop suggest that small-cap traders are already getting cold feet.
Equal-weight S&P 500 ETF Hits Reversal Zone
QQQ is leading and near a new high. SPY is also performing well with a strong breakout. Large-caps and large-cap techs are doing fine, but performance deteriorates as soon as we move out of tech and down in market cap. The S&P 500 EW ETF (RSP) has the same stocks as SPY. SPY is weighted by market cap, which favors the magnificent seven and other large-caps. RSP treats all stocks equal and reflects performance for the “average stock” in the S&P 500.
The left side shows weekly bars for RSP. There is a lower high from January 2022 to July 2022 and a breakdown in September. RSP became very oversold in mid October and surged the last three weeks. Notice that this surge returned to the support break in the 146 area. On the right, we can see the falling 200-day coming into play around 145. This surge also retraced 50-67 percent of the prior decline. Taken together, RSP is in a resistance reversal zone. The short red line is at 141 and a close below this level would fill the gap and erase most of Tuesday’s surge. This would be bearish.
Chart Analysis, Setups and Trading Ideas
Semiconductor ETF Hits New High, but Becomes Overbought
The Semiconductor ETF (SMH) is the strongest of the semiconductor ETFs because it is the only one hitting a new high (SOXX, SMH, XSD). Strength in SMH stems from the weighting of the top components. On the left, the weekly bars show a new high in July and a falling flag/channel into October. SMH surge above resistance over the last three weeks and tagged a new high this week. On the right, we see that SMH surged 19% the last three weeks and is short-term overbought. This is not an ideal time to buy. Instead, it is the time to stake out a support-reversal zone to watch on a pullback. Broken resistance turns support and a 33-50% retracement marks a possible reversal zone. A pullback to the low 150s would be a throwback to the breakout zone. This is the area to watch for a second chance to partake in the breakout.
Support-Reversal Zones for AMD, AAPL and MSFT
The next chart shows AMD with a support-reversal zone in the 110 area.
The next chart shows Apple (AAPL) with a support-reversal zone in the 180 area.
The next chart shows Microsoft (MSFT) with a support-reversal zone in the 350-350 area.
Regeneron Tests Rising 200-day SMA
Biotechs as a group are not performing well, but Regeneron (RGEN) bucked the selling pressure in 2023 and worked its way higher. The left chart shows weekly bars with a choppy uptrend over the last two years. And I do mean choppy. The right chart shows more chop over the last five weeks with a sharp decline to 770, a surge to 840 and a decline back below 800. RGEN established support with the low in late October and is testing this area again. Also notice that the decline since mid October retraced 50% of the July-August surge. This puts RGEN in a support-reversal zone. The stock formed spinning tops on Monday and Wednesday. These candlesticks signal indecision that would foreshadow a short-term reversal. A break above Tuesday’s high would be short-term bullish.
