Recent Commentary and Analysis
The long-term trend is up for the S&P 500 and Nasdaq 100, but questionable for the S&P SmallCap 600 and S&P MidCap 400. Small-caps and mid-caps are largely off my radar right now. Despite long-term uptrends and bullish evidence for large-caps, I remain in the correction camp for three reasons. First, SPY and QQQ became extremely extended in early September, as measured by
ETF Trends, Patterns and Setup – Breakouts from September Corrections, Laggards still Lagging and Bonds Sag
After correcting most of September, many stock-related ETFs caught a bid the last few days and we are seeing short-term breakouts in several areas. The Solar Energy ETF (TAN) is far an away the leader and the only ETF in the core list to hit a new high. Nevertheless, a handful are knocking on the new high door with pennant breakouts in the making (ITB).
StochClose Strategy (Part 6) – Update, Thoughts on Cherry Picking, Testing with a Moving Average Filter
The StochClose strategy offers a systematic approach to trading a defined ETF universe. This is the sixth installment of a five-part series that started with an introduction to the StochClose indicator on April 21st. This first installment covered the rationale for the indicator and its settings, the signal thresholds and a ranking table. The second installment tested a momentum-rotation strategy, the third outlined a
The S&P 500 SPDR is down around 6% this month and QQQ is down around 8%. These two hit new highs on September 2nd, plunged the next three trading days and then worked their way lower. Both are below their 50-day moving averages for the first time since April.
Weekend Video – Falling Wedges Take Shape, Select Tech and Housing Hold Up, Energy and Finance Remain in Doghouse
Today’s video starts with the broad market charts as SPY formed a weekly spinning top and QQQ formed a piercing pattern. Even though the ROC Shock reversal earlier this month remains the dominant chart feature, falling wedges are taking shape and breakouts from these corrective patterns would be short-term bullish. The Nasdaq 100 is holding up the best and its short-term breadth indicators are oversold. In addition, we are also seeing relative strength in several tech-related ETFs
SPY and QQQ fell in September and are in short-term downtrends, which are considered corrections within a bigger uptrend. The S&P SmallCap 600 SPDR and S&P MidCap 400 SPDR also fell in September, but these declines do not look like mere corrections within a bigger uptrend. MDY, IJR and IWM fell well short of their January-February highs and broke their downward sloping 200-day SMAs. These three look like they are reversing the uptrends that began with the March blast off.
ETF Trends, Patterns and Setups – Dollar and Bonds Shine, Gold Dulls, Tech ETFs Hold, SPY Continues Lower, Failed Flags
It has been a rough month for everything except the Dollar and Treasury bonds. The chart below shows month-to-date performance for nine ETFs. The Dollar Bullish ETF (UUP) and 20+ Yr Treasury Bond ETF (TLT) are the only gainers this month and both have been positive for the entire month. This is a big difference from August.
Breadth Model Update: %Above 200-day SMA Sags for SPX and OEX and AD% Reflects Broad Downside Participation
This is a midweek update to address Monday’s price action and its effect on the breadth indicators and models. At this stage, there was only one new signal: %Above 200-day for $MID broke below 45%. Nine of the ten breadth models remain bullish, but we saw more deterioration in the breadth indicators on Monday. Selling pressure was the strongest un small-caps and mid-caps over the last five weeks (since August 15th).
This is a midweek update to address Monday’s price action in some of the ETFs in the core chart list. We saw a continuation lower in SPY and QQQ, but some of the tech-related ETFs held up relatively well. ETFs that held up relatively well during broad selling pressure are often the ones that lead on any bounce, even if it is just an oversold bounce. Elsewhere
Chartists are often faced with a choice: wait for the breakout or anticipate using a mean-reversion setup. The Metals & Mining SPDR (XME) broke out of a bullish consolidation this week and the breakout signals a continuation of its long-term uptrend. Chartists keying off the mean-reversion setup could have anticipated the breakout and gotten the early jump. Let’s investigate.
Weekend Video – Spinning Top Follow Thru, Correction or more?, Breadth Indicators Deteriorate, 4 Channel/Flag Breakouts, 2 to Watch
Today’s video starts with the S&P 500 and the reversal seen over the last few weeks. We look at the spinning top, the outside week, downside follow through and the ROC shock. With a reversal in play, I put forth a correction target for the S&P 500 SPDR and this serves as the base case for the broader stock market (a correction within a bigger uptrend).
The medium-term indicators and breadth models are still bullish, but the ROC Shock in early September and some waning breadth indicators argue for at least a correction of the March-September advance. I covered the ROC Shock in detail last week and will review the findings. First, keep in mind that the character of the market (SPY) changed in January 2018 as the swings became bigger and 52-week lows were interspersed with 52-week highs. Big swings and volatility are the order of the day for now.
ETF Trends, Patterns and Setups – SPY and QQQ Look Vulnerable, Bond Proxies Catch a Bid, Gold Stalls as Dollar Firms
There’s been a shake up this week. A handful of equity-related ETFs are in the top group, as far as the trend, patterns and setups are concerned. However, I downgraded several groups because it looks like SPY and QQQ are moving further into correction mode. The majority of stock-related ETFs will be under pressure should SPY correct and the majority of tech-related ETFs will be under pressure should QQQ correct.
Video: SPX Trend/Swings, Testing Market Filters, Testing 5 Trend-Following Indicators, Developing and Testing a Strategy around 65-day RSI
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Update for Precious Metals (GDX, GLD, SLV), Healthcare (XLV, IBB, XBI) and Bond Proxies (TLT, XLU, XLRE)
Tech-related ETFs continue to drag their feet and remain in corrective mode. This puts the attention elsewhere and biotechs are picking up the slack. Namely, the Biotech ETF (IBB) and Biotech SPDR (XBI) made bids to end their corrections and resume their bigger uptrends. Elsewhere, precious metals related ETFs bounced within their consolidations and bond proxies popped with XLU and XLRE getting big moves.
There are fewer silver crosses in the major stock indexes and this shows less participation during the last leg higher. A silver cross occurs when the 20-day EMA crosses above the 50-day EMA. DecisionPoint took this concept on step further and developed breadth indicators based on the percentage of stocks with silver crosses. This is a great way to look under the hood and aggregate medium-term trend performance for each index. The chart below shows this indicator for four key indexes: $NDX, $SPX, $MID and $SML. I set the bullish and bearish thresholds at
Weekend Video – Acceleration, Outsized Decline, Mixed Indicators, Waning Breadth, Golden Pennants, TLT Battles Breakout …
Today’s video starts with the S&P 500 and breaks down the reversal over the last two weeks. We can see the index becoming overextended, accelerating higher and then suddenly reversing with an outsized decline. Such reversals occurred in the past and we will show what it means going forward. Elsewhere, the medium-term indicators turned
Timing Models – Accelerations, Trend Shocks, Indicators turn Mixed, Downside Targets and Breadth Models
The stock market was overextended in late August and the bulls gave it one more push higher with a small acceleration higher into late September. Technically, an acceleration higher signals an increase in momentum, which can be bullish. However, as with most technical signals, perspective is needed for interpretation. Today we will look at the accelerations that led to a reversal and the outsized decline. What do they portend going forward?
ETF Grouping and Ranking Report – Outsized Declines, Retracement Targets, Patience During Corrections, Gold and Bonds Balk
Stocks were hit hard from Friday to Tuesday with the S&P 500 SPDR, Nasdaq 100 ETF and others recording outsized declines. Today we start with these outsized declines and show what they entail going forward. Stocks were already extended and these sharp declines signal the start of a corrective period. At this point, I will treat any weakness in SPY and QQQ as a correction within a bigger uptrend.
The S&P 500 SPDR (SPY) fell over 2% this week for the biggest weekly decline since June. The long-term trend is still up because SPY remains well above the rising 40-week SMA. However, a big Spinning Top candlestick formed last week and a volatility indicator ticked higher. Spinning Tops signal indecision that
Weekend Video – Spinning Top, Indicators Turn Mixed, Correction Targets, Bond Breakouts Fail, Banks Buck Selling and More
The extended uptrend in stocks hit a speed bump this week with a sharp decline on Thursday-Friday. Today we will review the percent above 200-day SMA indicators and their extended nature. Attention then turns to the medium-term indicators, which turned mixed this week. The odds for a correction were already brewing and it looks like some sort of correction is unfolding. I will look at potential targets for SPY and QQQ, as well as for several ETFs in the ChartBook. Elsewhere