Video and Report Headlines
- SPX 4wk High-Low Percent Remains Bullish
- SPY and QQQ Extend within Steep Uptrends
- MDY Gets Cold Feet after Breakout
- IPAY Holds Breakout
- IBB Corrects after Monster Move
- BLOK Retraces Half of Big Advance
- CAH Consolidates Near 52-week High
- CVS Surges off Support-Reversal Zone
The next Chart Trader will be posted on Tuesday morning, February 13th.
There is no change in the overall market environment, which was discussed in detail on Tuesday. The weight of the evidence remains bullish, but the stars are aligning for a correction. SPY and QQQ are overbought. Breadth is deteriorating within the S&P 500. Small-caps and mid-caps are weak with the Mid-Cap and Small-cap ETFs forging lower highs from December to February. Seasonally, February is one of the weakest months of the year. The period from mid February to mid March is perhaps the weakest 4-5 week stretch over the last 30 years. As with February 2023, the odds for a correction are above average right now. This could make trading very tricky over the next few weeks.
Article on Zweig Breadth Thrust
Page for Composite Breadth Model
SPX 4wk High-Low Percent Remains Bullish
The chart below updates SPY, SPX %Above 50-day SMA and SPX 4wk High-Low Percent. These indicators were covered in detail on Tuesday. A bearish divergence formed as SPY moved to new highs and SPX %Above 50-day SMA fell to 62.62%. Fewer S&P 500 stocks are partaking in the current advance and this shows less strength within the index itself. Bearish divergences and deteriorating breadth serve as a warning, but are not always great for timing a pullback in SPY. This is because SPY is dominated by large-caps.
The bottom window shows SPX 4wk High-Low Percent. The green arrows show when this indicator crosses above +20% (bullish signals), and the red arrows show crosses below -20% (bearish signals). The indicator triggered bearish on December 17th, but flipped back to bullish on the 29th. It remains bullish until a move below -20%. I will continue to watch and update this signal.
SPY and QQQ Extend within Steep Uptrends
SPY extended its uptrend with a surge to another new high. The ETF is up 21.29% since the October low and up 5.5% since mid January. There is no setup on this chart, just a strong uptrend that remains overbought. The January 31st low and December trendline mark first support at 482. A break here would reverse the short-term uptrend and start the correction process.
QQQ also tagged a new high on Wednesday with a 1% gain. The ETF is up around 25% since late October and up 6% since mid January. As with SPY, there is no setup on this chart, just a strong uptrend that remains overbought. The January 31st low and December trendline mark first support at 416.
MDY Gets Cold Feet after Breakout
Mid-caps and small-caps are lagging large-caps. SPY and QQQ hit new highs on Wednesday, but the S&P MidCap 400 SPDR (MDY) and Russell 2000 ETF (IWM) remain below their late January highs, and also below their late December highs. Here are the year-to-date returns: SPY +4.8%, QQQ +5.5%, MDY -.6% and IWM -3.7%. For stocks in the S&P 500, half are up year-to-date and half are down. Despite big gains in SPY and QQQ, it is a split market with selective leadership.
I am watching MDY for the first clues that this rally may broaden. MDY surged with the rest of the market from late October to late December. After this 20% surge, MDY corrected with a falling wedge and broke out with a surge and gap on January 22nd (green arrow). There was no follow through to this breakout and MDY filled the gap with a sharp decline on January 31st. The breakout failed at this point, but MDY did not continue lower. Instead, the ETF traced out a potential falling flag. A breakout at 507 would be bullish and open the door to new highs. Until a breakout, MDY is short-term bearish because of the failed breakout and the fact that the current flag is still falling.
Chart Analysis, Setups and Trading Ideas
IPAY Holds Breakout
The Mobile Payments ETF (IPAY) sports a chart similar to MDY. IPAY surged some 33%, corrected with a falling wedge and broke out with a gap-surge in late January. The gap (blue shading) is holding as the ETF consolidated above the breakout zone. Short-term, a pennant formed after the wedge breakout. Overall, the cup is half full as long as the January gap-breakout holds. A close below 45 would negate this breakout and call for a re-evaluation.
IBB Corrects after Monster Move
The next chart shows the Biotech ETF (IBB) surging 24% and then correcting with a falling wedge. IBB is one of the laggards here in 2025 because it is down 1.6% year-to-date. Almost everything moved sharply higher from late October to late December. The market rally then turned selective in 2024. Of the 272 ETFs in the MasterList, 89 are up year-to-date and 183 are down. The falling wedge looks like a corrective pattern, but the immediate trend is down as long as the wedge falls. This means IBB could correct further. I am marking wedge resistance at 136.5 and a break out here would be short-term bullish.
BLOK Retraces Half of Big Advance
The Transformational Data Sharing ETF (BLOK) is just the blockchain ETF. Not sure where that silly name comes from! The ETF surged 70% from early October to late December and then retraced around 50% with a decline into late January. A falling channel of sorts is taking shape and this looks like a correction within a bigger uptrend. BLOK popped with a big three-day gain at the end of January and then fell back. This pop and drop establishes a short-term resistance level to watch for a breakout (28). A breakout at 28 would be bullish and I would then set re-evaluation support at 26.
CAH Consolidates Near 52-week High
Cardinal Health (CAH) is part of the Healthcare SPDR (XLV) and the Healthcare Services SPDR (XHS). XLV hit a new high this week and remains a leading sector. CAH provides products and services to hospitals, pharmacies and clinics. Before the analysis, note that I am ignoring the pop and drop the day before earnings (2-Feb). CAH is in a long-term uptrend with a 52-week high in mid December (and on 2-Feb). The stock consolidated after the December high with a triangle forming and I view this as a bullish continuation pattern. Resistance is set at 107 and a breakout here would be bullish.
CVS Surges off Support-Reversal Zone
CVS Health (CVS) is also part of the Healthcare SPDR (XLV), which is one of the strongest sectors right now. Long-term, the chart shows a rounding bottom from May to December and a breakout in late December. After a 29% advance, the stock retraced around 67% with a decline back to the autumn highs (blue zone). This decline also returned to the 200-day SMA (red line). CVS established support in the low 70s with a couple of bounces the last three weeks and broke out with a surge on Wednesday. Earnings were also reported on Wednesday. The gap and breakout are bullish and I would use the 200-day SMA as a re-evaluation level.
