Video and Report Headlines
- Bull Market Sequence
- New Highs and Leading ETFs
- NDX and SML Lag on Breadth
- 4wk High-Low Percent Remains Bullish
- SPY and QQQ Maintain Steep Uptrends
- Software ETF Consolidates after New High
- MSFT Breaks Out
- ADBE Tests Mid Summer Lows
- CIBR Forms Lower High
- PANW and ZS Get Slammed
- CRWD and CYBR Hold Strong
- Interest Rate Sensitive REITs Fall
The next Chart Trader will be posted on Thursday morning, March 21st.
Some tech stocks stumbled over the last few weeks, but other parts of the market picked up the slack. The chart below shows the percentage of stocks above their 50-day SMAs for the S&P 500, Nasdaq 100, S&P MidCap 400 and S&P SmallCap 600. This indicator fell for the Nasdaq 100 and S&P SmallCap 600 in 2024 (red arrows). It also fell for the S&P 500 and S&P MidCap 400, but only from January to mid February. The green arrows show these indicators improving for large-caps and mid-caps. Currently, 79% of S&P 500 stocks are above their 50-day SMAs and 72% of S&P MidCap 400 stocks are above their 50-day SMAs. This improvement means the advance is broadening.
Bull Market Sequence
The weight of the evidence is bullish for stocks. The chart below shows the bullish sequence starting with the Zweig Breadth Thrust on November 3rd. See the ZBT1500 Thrust in the middle window and the green arrows on the price chart. SPY broke out of its falling channel (red lines) a week later and also moved above the upper Keltner Channel for a volatility breakout (blue arrow). The Composite Breadth Model (bottom window), which has 14 breadth indicators, then turned bullish on December 7th with a move to +1. There can still be corrections and pullbacks along the way, but the weight of the evidence points to a bull market.
Links: Zweig Breadth Thrust and Composite Breadth Model
NDX and SML Lag on Breadth
The next chart shows the percentage of stocks above the 50-day SMA for the S&P 500, Nasdaq 100, S&P MidCap 400 and S&P SmallCap 600. Breadth improved for large-caps and Mid-caps from mid February to early March (green arrows). It did not improve for the Nasdaq 100 and Small-caps (red arrows). Nasdaq 100 breadth peaked in late December and waned in 2024. This did not affect QQQ because it is weighted by market cap.
What is the tipping point for breadth? S&P 500 breadth is fine with 70.38% of stocks above their 50-day SMAs. A move below 50% is the obvious level to watch because the cup would then be half empty. I prefer to add a buffer and will watch 40%. The red lines in early August show the 40% level. The odds of a correction increase significantly when these breadth indicators start breaking 40%.
4wk High-Low Percent Remains Bullish
The next chart shows the 4-wk High-Low Percent indicators for the S&P 500, Nasdaq 100, S&P MidCap 400 and S&P SmallCap 600. I am only focused on the S&P 500 and Nasdaq 100 for signals (see explanation below the chart). The green and red arrows on the chart show the signals, and the current signal is bullish (since November 2nd). Both SPX and NDX 4wk High-Low Percent must cross below -20% to trigger a bearish signal. NDX 4wk High-Low Percent hit -18% on Friday, but did not trigger. SPX 4wk High-Low Percent was slightly positive (+1.6%) on Friday. Again, we are seeing relative weakness in the Nasdaq 100.
About the Indicators: 4-wk High-Low Percent is the percentage of 4-week highs less the percentage of 4-wk lows within an index. These indicators turn bullish with a move above +20% (green bars) and bearish with a move below -20% (red bars). I am only focused on the S&P 500 and Nasdaq 100 for signals. The green shading on the chart above shows the active bullish signals for the S&P 500 and Nasdaq 100. The red shading shows the active bearish signals. The green arrows on the price chart show when 4-week High-Low Percent is bullish for both the S&P 500 and Nasdaq 100. This means BOTH must be bullish to signal a short-term uptrend in SPY. A downtrend signal triggers when BOTH are bearish.
SPY and QQQ Maintain Steep Uptrends
SPY continues to stair-step higher with short pullbacks and new highs. The red lines show the ATR Trailing Stop (3 x ATR(22). This ATR Trailing Stop started in early November and held throughout the short-term uptrend, which means pullbacks in 2024 were less than 3 ATR(22) values. A break below this line (501.38) would signal a pullback that was more than 3 ATR(22) values and this would be deemed an outsized decline. Notice that SPY experienced an outsized decline on August 9th (3 ATR drop) and this signaled the start of a correction.
I am also using the ATR Trailing Stop (3 x ATR(22)) to define the short-term uptrend in QQQ (429.59). QQQ broke this line in early January and then surged to a new high. As with the 4-wk High-Low Percent indicators, I would like to see both SPY and QQQ trigger their ATR Trailing Stops before calling for a market correction.
Leading ETFs with New Highs
The lists and CandleGlance charts below show notable ETFs recording 52-week highs over the last five trading days (intraday). Notice that the S&P 500 SPDR (SPY), S&P MidCap 400 SPDR (MDY) and Nasdaq 100 ETF (QQQ) are not on this list. Instead, we have the S&P 500 EW ETF (RSP), two low volatility ETFs (SPLV, USMV) and some value ETFs (VLUE, IVE, IWD). There are no growth ETFs. This suggests some rotation into the more conservative parts of the market.
- S&P 500 EW ETF (RSP)
- S&P 500 Low Volatility ETF (SPLV)
- S&P 500 Minimum Volatility ETF (USMV)
- S&P 500 Value ETF (VLUE)
- S&P 500 Value ETF (IVE)
- Russell 1000 Value ETF (IWD)
The Finance, Materials and Communication Services sectors hit new highs over the last five trading days. Tech, Industrials, Healthcare, and Consumer Discretionary did not. Three commodity ETFs graced the new high list: Global Timber ETF (CUT), Copper ETF (CPER) and DB Agriculture ETF (DBA).
- Finance SPDR (XLF)
- Materials SPDR (XLB)
- Communication Services SPDR (XLC)
- Natural Resources ETF (IGE)
- Insurance ETF (KIE)
- Food & Beverage ETF (PBJ)
- Global Timber ETF (CUT)
- Copper ETF (CPER)
- DB Agriculture ETF (DBA)
The FinTech ETF (FINX) and Mobile Payments ETF (IPAY) were the only tech-related ETFs to hit new highs. Note that some of the leading tech ETFs are starting to lag. The Semiconductor ETF (SOXX) peaked on March 8th. The Software ETF (IGV) and Cybersecurity ETF (CIBR) peaked on February 9th. The Cloud Computing ETF (SKYY) peaked on March 4th. I am not calling these major tops. These ETFs are simply moving into some sort of corrective phase. They were all up big from late October to February-March and are entitled to a correction.
- Technology SPDR (XLK)
- FinTech ETF (FINX)
- Semiconductor ETF (SOXX)
- Software ETF (IGV)
- Cloud Computing ETF (SKYY)
- Cybersecurity ETF (CIBR)
Chart Analysis, Setups and Trading Ideas
Software ETF Consolidates after New High
The chart below shows the Software ETF (IGV) surging some 36%, hitting a new high on February 9th and consolidating with a triangle. Technically, this is a consolidation within a bigger uptrend, which makes it a bullish continuation pattern. A break above last week’s high (red line) would signal a continuation higher.
The blue line pairs mark prior consolidation, correction or pullback patterns. Notice that they come in different shapes, sizes and durations. Corrections are like a box of chocolates: you never know what you are going to get. The correction from mid July to late October was not deep, but it lasted three months. IGV shows a triangle now, but this pattern could evolve into a falling wedge or channel with a deeper pullback. For example, a 50% retracement of the prior advance would extend to the 78 area.
MSFT Breaks Out
The next chart shows Microsoft (MSFT) breaking out of a small triangle and hitting a new high last week. MSFT is the largest holding (8.76%) in the Software ETF. Others include CRM (8.53%), ORCL (8.33%), ADBE (7.94%) and INTU (7.21%). The triangle breakout is bullish until proven otherwise. A close below 400 would negate this breakout and put MSFT in corrective mode. For reference, the stock failed to hold the July breakout and then corrected into September.
ADBE Tests Mid Summer Lows
The next chart shows Adobe (ADBE) forming a double top (red arcs) and confirming this pattern with a support break on a sharp decline. The stock formed a rising flag and then gapped below 500 on Friday. This 20% decline puts ADBE back near the August-September lows and the 50% retracement. While this is an area to watch for support and firming, ADBE is seriously lagging right now and needs some time to find its footing.
CIBR Forms Lower High
The next chart shows the Cybersecurity ETF (CIBR) leading the market with a 36% advance and new high on February 9th. The stock plunged in late February, rebounded to around 58 and then broke short-term support over the last few days. Overall, it looks like a lower high and the beginning of a corrective period. The January low and 50% retracement mark a target zone in the 52 area.
PANW and ZS Get Slammed
There is a phenomenon at work in certain groups, such as software and cybersecurity. Some stocks are holding up and others are getting clobbered. Microsoft is holding up as Adobe (ADBE) plunged 20%. CrowdStrike (CRWD) and CyberArk (CYBR) are holding up, but Palo Alto (PANW) and Zscaler (ZS) are down sharply. The chart below shows PANW rising 90% from mid August to mid February and then falling 30%. This decline retraced around 2/3 of the 90% advance and returned to the prior breakout zone (green shading). This makes it a Support-Reversal Zone. PANW bounced above 320 and then fell back to the 280 area. This March decline also retraced around 2/3 of the oversold bounce. Short-term, the stock established short-term resistance with last week’s high and a breakout here would be short-term bullish.
The next chart shows Zscaler (ZS) rising 97% from mid August to mid February and then falling 24%. This decline retraced around 50% of the 24% advance. Last week’s high marks short-term resistance at 206 and a breakout here would be bullish. Until a breakout, ZS could fall to the next Support-Reversal Zone around 170-180 (green shading).
CRWD and CYBR Hold Strong
The next chart shows CrowdStrike (CRWD) surging 140% from mid August to mid February. The stock consolidated with a triangle into March and broke out on an earnings-related surge. CRWD beat, whereas PANW missed. PANW was priced for perfection and CRWD is priced for perfection. CRWD is holding the triangle breakout more or less. I am marking support at 299 and a close below this level would argue for a deeper correction.
The next chart shows CyberArk (CYBR) with a 98% gain, which underperformed CrowdStrike’s 140% surge. This move was pretty much straight up. CYBR consolidated with a triangle into March and a breakout at 270 would be bullish. I am marking short-term support at 250 and a break here would argue for a deeper correction. The green shading marks a Support-Reversal Zone in the 210-220 area.
Interest Rate Sensitive REITs Fall
I highlighted the Real Estate SPDR (XLRE) on February 22nd with the channel/wedge breakout. The ETF followed through on this breakout with further strength, but did not break above its January highs. Instead, XLRE fell sharply as the 10-yr Treasury Yield surged (and the 20+ Yr Treasury Bond ETF (TLT) fell). The next charts shows the 10yr Yield surging above 4.3%. It looks to be extending its long-term uptrend.
XLRE, XLU and other high-dividend names are sensitive to interest rates. This could be negative for rate sensitive stocks and ETFs. In any case, XLRE triggered the ATR Trailing Stop with the decline below 38.92.
The next chart shows the Utilities SPDR (XLU), which was featured on March 5th with a breakout. The ETF fell back over the last five days, but the breakout is holding (red line). The ATR Trailing Stop is set at 61.62.
