Video and Report Headlines
- Bull Market Sequence
- 4wk High-Low Percent Remain Bullish
- SPY and QQQ Surge to New Highs
- Rally Broadens the Last Few Weeks
- Utes Follows REITs with Breakout
- Treasury Bond ETF Turns Up within Wedge
- Regional Banks Suck but KBWB Gets Breakout
- CVS Falls after Breakout Surge
- ZTS Falls Sharply after Breakout
- TDY Consolidates after Breakout Surge
The next Chart Trader will be posted on Thursday morning, March 7th.
Bull Market Sequence
We are in a bull market, but the stock market is not firing on all cylinders in 2024. Overall, the weight of the evidence remains bullish because most cylinders are firing and supporting the uptrends. Note that the S&P MidCap 400 SPDR (MDY) and S&P 500 EW ETF (RSP) closed at new highs on Monday. The Russell 2000 ETF (IWM) finally exceeded its December high last Friday, but the S&P SmallCap 600 SPDR (IJR) remains 2.5% below its December high. Overall, 62% of S&P 500 stocks are up year-to-date, which means 38% are down. This is net positive and enough to support an uptrend for the S&P 500. However, 38% is not a small number and shows some sizable pockets of weakness within the broader market.
Links: Zweig Breadth Thrust [7] and Composite Breadth Model [3]
4-week High-Low Percent Remains Bullish
S&P 500 4-week High-Low Percent turned bullish on January 29th with a move above +20% and remains bullish (bottom indicator window). This supports the short-term uptrend in SPY. This indicator is the percentage of S&P 500 stocks making 4-wk highs less the percentage making 4-wk lows. SPX 4wk High-Low Percent is bullish until a move below -20% (red bars). This would show a significant increase in four week lows and be short-term bearish.
SPY and QQQ Surge to New Highs
SPY recorded a new closing high on Friday and an intraday high on Monday. The ETF is up 24.74% over the last 86 days and up 3% over the last eight days. For reference, SPY was up 20% in 96 days in 2023 (March to July) and did not signal a correction until it broke the 50-day SMA in mid August (red arrow). The ETF is currently 5% above its 50-day SMA and this moving average is headed towards the 490 area. I will leave short-term support at 490 and call for a correction when/if SPY breaks this level.
QQQ is up 28.65% the last 86 days and up 4.33% the last eight days. Anything SPY can do, QQQ can do better! As with SPY, QQQ continues to stair-step its way higher with each reaction low marking short-term support. Current support is set at 420 and this level aligns with the 50-day SMA. Also note that QQQ was up 34% in 88 days in 2023 and the correction did not start until a break of the 50-day in mid August (red arrow).
Chart Analysis, Setups and Trading Ideas
Rally Broadens the Last Few Weeks
The next chart shows the S&P MidCap 400 SPDR (MDY) surging to a new high with a 4.2% advance the last eight days. MDY was first featured on February 8th with a bull flag [8]. Note how the ETF broke out and then fell back with a sharp 1-day decline on February 13th. This one-day pullback returned to the breakout zone and offered a second chance to partake in the breakout. MDY held the ATR Trailing Stop on February 13th and surged above 535. The ATR Trailing Stop is following the ETF higher and currently sits at 522.55, which is 2.4% below the current close. This is what traders would give back should the trailing stop trigger.
XLU Follows XLRE with Breakout
I featured the Real Estate SPDR (XLRE) on February 22nd [9] as it renewed its falling wedge breakout. The chart below shows XLRE surging some 27% and then correcting with a falling channel in 2024. XLRE first broke out on February 15th. The ETF then traded choppy around the breakout zone and surged to 39.99 the last four days. This solidifies the breakout and the ATR Trailing Stop rose along with prices.
The next chart shows the Utilities SPDR (XLU) with a 21.5% advance into mid December and a falling wedge into mid February. This decline retraced 50-67% of the prior advance, which suggests that it was a correction. XLU broke above its early February high with a strong advance on Friday. This breakout signals a continuation of the prior advance and targets a move to the upper 60s (blue shading). The late February low marks re-evaluation support at 60.625 (call it 60.50)
TLT Turns Up within Wedge
XLU, XLRE and other interest rate sensitive groups are positively correlated with the 20+ Yr Treasury Bond ETF (TLT). This means they tend to move in the same direction. Notice how XLU and TLT both surged from late October to December and fell in 2024. As noted above, XLRE and XLU turned up with breakouts over the last 1-2 weeks. Is TLT also poised to turn up?
Chartists looking to anticipate a bigger breakout can focus on the swings within the falling wedge. The red and green arrow-lines mark three swings within the falling wedge (down, up, down). TLT reversed the February downswing with a short-term breakout (94) last week. This is the first bullish signal. I am marking re-evaluation support at 92.
Regional Banks Stink but KBWB Gets Breakout
The Finance SPDR (XLF) and the Insurance ETF (KIE) are part of the leadership group as both hit new highs last week. The Regional Bank ETF (KRE) and Bank SPDR (KBE), however, peaked in December and moved lower in 2024. In contrast, the KBW Bank ETF (KBWB) is showing signs of life with a triangle breakout last week and 1.8% surge on Monday. KBWB was first featured on February 22nd [9] as the triangle formed. The breakout is bullish and I would mark re-evaluation support at 48.
CVS Falls after Breakout Surge
Of course, not all setups and breakouts are working. I highlighted CVS on February 8th [8], the day after the gap and breakout. The stock held in the 76-78 area in mid February and then moved lower the last six trading days. This move filled the gap and the breakout is looking shaky. I suggested using the 200-day SMA for a re-evaluation level and it is currently at 71.86.
ZTS Falls Sharply after Breakout
The next chart shows Zoetis (ZTS) with a falling channel and a breakout last week. I featured ZTS on February 29th [10] with this breakout, and the stock promptly fell. A decline back to the mid 195 area would be fine, but this decline was sharp as the stock fell 6% in three days. Clearly, an outsized decline is not healthy, especially right after a breakout. Moreover, this is the second such decline in the last four weeks. This breakout is also failing. I originally applied an ATR Trailing Stop (3 x ATR(22)) and the stock is very close to triggering this stop (187.42).
TDY Consolidates after Breakout Surge
Teledyne (TDY) was first featured on February 22nd and I am showing it again because the setup remains valid. TDY is part of the Aerospace & Defense ETF (PPA), which is trading near a new high and up 3.6% this year. TDY is lagging the market and its group this year because it corrected after a big advance. Overall, the stock surged 22% and then retraced 33-50% with the pullback this year. A sort of wedge/triangle formed and I view this as a bullish continuation pattern. A breakout at 435 would be bullish and I would then set re-evaluation support at 420.
