Systematic Strategies and Next Level Technical Analysis
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The Semiconductor ETF fell pretty hard in July, but the decline was always viewed as a correction because it met the retracement requirements and formed a typical corrective pattern. Chartists looking for signals that a correction is ending can turn to Percent B and SMH %Above 50-day SMA. Both became oversold in July and one became oversold in early September. This means SMH is again setting up bullish as it corrects within a bigger uptrend. $SMH !GT40SMH
The Semiconductor ETFs (SMH & SOXX) and the Memory ETF (DRAM) broke out with surges into August and then corrected into early September. The August breakouts were medium-term bullish and the current corrections provide short-term setups. This report will identify the patterns at work, the key levels to watch and the one showing relative strength. $SMH $SOXX $DRAM $NVDA $TSM $MU
The Industrials SPDR was hit hard over the last two weeks, but the long-term trend remains up and oversold conditions are present. Today’s report will show a long-term breadth indicator to define the trading bias and three short-term breadth indicators to identify oversold conditions. Attention then turns to XLI’s largest industry group, the Aerospace & Defense. $XLI !GT200XLI !GT50XLI !GT20XLI $ITA
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
Breadth deteriorated over the last few weeks with the percentage of stocks above their 200-day SMAs moving from the mid 70% area to the mid 65% area. 65% of S&P 1500 stocks are above their 200-day SMAs, and in long-term uptrends. This also means 35% are below their 200-day SMAs, which is a sizable chunk.
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. $XLI $SPY $SPXA200R
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
Chartists missing a breakout can watch for a “throwback”, which offers a second chance to partake in the breakout. A throwback occurs when price breaks out, extends higher and then pulls back to the breakout zone, which turns first support. Price then turns back up and resumes its breakout. Today’s report will show a successful throwback and strong upturn in the Agribusiness ETF $MOO.
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