A Medium-term Breadth Indicator Waves the Caution Flag (Free)

Not all ETFs are created equal and the name does not always tell the entire story. One would think that the Industrials SPDR (XLI) and the Industrials iShares (IYJ) are similar in make up and performance. This is not the case because one has a clear edge over the other.

The seasonal patterns over the next two months are not very strong, but price action is strong with the S&P 500 hitting a new high. Price action is more important than the seasonal pattern because profits and losses are driven by price changes, not seasonal tendencies. Seasonality becomes a force when it aligns with price action. Let’s investigate.

Last weekend’s post showed the Semiconductor ETF (SOXX) with a 10 day overbought streak and several ETFs with even bigger overbought streaks. These streaks came to an end this week as SOXX fell 6.21%, its biggest weekly decline since mid March. As measured by Normalized ROC, this is an outsized decline that argues for at least a corrective period over the next few weeks.

The Semiconductor ETF (SOXX) and several other ETFs are on a serious roll in 2021. For the fourth time since 2009, 14-day RSI was above 70 for ten or more days. This is an exceptional streak, but SOXX is not alone and there are even longer streaks. The following list shows some ETFs and the number of days RSI has been above 70: ROBO (39), DRIV (25), ARKQ (13), EWT (13), MOO (12), XRT (11), SOXX (10), YOLO (10). Note that these numbers are based on Thursday’s close.

Visual chart analysis is prone to subjectivity and biases. While we cannot completely remove subjectivity, we can approach chart analysis in a systematic fashion and increase objectivity. This commentary will show an example using the Home Construction ETF (ITB) because the ETF has traded flat since mid October. Is this a top or merely a correction?

Several big tech stocks have consolidation patterns working the last few months and Bollinger Band squeezes in December. These include Apple, Amazon, Microsoft and Nvidia. Today’s article will focus on the strongest of the four, and the one with a breakout working already.

There was a serious shift over the last five weeks as commodities surged, bonds fell and the Dollar recorded new lows. There were also some noticeable divergences as the Inflation-Indexed Bond ETF (TIP) edged higher and the 20+ Yr Treasury Bond ETF (TLT) moved lower. This divergence is only five weeks old, but it does suggest a whiff of

The weekly high-low range for the Nasdaq 100 ETF (QQQ) was the narrowest of the year this past week and the ETF is battling triangle resistance. A narrowing range shows indecision and a volatility contraction. Even though this is just one weekly bar, QQQ is at a moment of truth. Will we see a triangle breakout and continuation higher or a failure at resistance and extended correction?

Even though the Biotech ETF (IBB) and the Biotech SPDR (XBI) represent the same industry group, their composition is very different and one is clearly outperforming the other. Nevertheless, the laggard still has a big bullish continuation pattern and this group looks bullish as a whole.

New highs and a fast growing industry group make for a powerful combination. Today’s article will focus on two ETFs that capture two fast growing industries, video gaming and esports. We will show why these two ETFs are leading, why a consolidation within an uptrend is bullish and why a 50-day SMA is better suited for mean-reversion trading.

Breadth indicators, such as Advance-Decline Percent, measure the participation behind a move in the underlying index. Sometimes participation is so strong that it tips the scales and signals the start of an extended move. For example, 10-day EMA of SPX AD% triggered a bearish breadth thrust on February 25th and the S&P 500 extended lower.

There are 11 sectors in the S&P 500, but the big six are the only ones we need to be concerned with when making a broad market assessment. The big six account for a whopping 82.5% of the S&P 500, which leaves the other 5 with just 17.5%. Consumer Staples is the seventh

The S&P 500 SPDR (SPY) gapped up on Monday and broke out of a classic correction pattern. The breakout is bullish, but the coast is not entirely clear. Here’s what to watch going forward.

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.

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.

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

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

Verizon (VZ) participated in the first leg up from late March to mid April, but then stumbled with a decline into mid June. This stumble, however, looks like a classic correction and the stock broke out with a strong move over the last six weeks. In addition, the TIP Trend Composite, which aggregates five trend-following indicators turned positive in early August. Let’s investigate further.

The total number of new highs in the S&P 500, S&P MidCap 400 and S&P SmallCap 600 continues to underwhelm. Even so, new highs are still outpacing new lows and this is enough to keep the uptrend since late March going. The first chart shows new highs and lows for the three indexes with horizontal lines at the 10% level (e. g. 50 and -50 for the S&P 500).

The Healthcare SPDR (XLV) is one of the strongest sectors in 2020. Even though it does not sport the biggest gain, XLV recorded a new high in July and some 80% of its components are above their 200-day EMAs. The new high points to a long-term uptrend and upside leadership, while the percentage of stocks above the 200-day EMA points to broad strength within the sector. Sector SPDRs, however, are only as strong as the sum of their parts (component stocks).