Video and Report Headlines
- Bull Market Sequence
- 52-week Highs Expand
- 4wk High-Low Percent Remains Bullish
- SPY and QQQ Maintain Steep Uptrends
- HUBS Consolidates above Breakout
- ILMN Pops on Good Volume
- SQ Hits Fresh 52wk High
- FinTech ETF Leads
- NOW Consolidates after New High
- Software ETF Consolidates Too
The next Chart Trader will be posted on Thursday morning, March 28th.
The weight of the evidence remains bullish for stocks, both long-term and short-term. Some groups within the Nasdaq 100 corrected over the last two months. S&P 500 stocks picked up this slack as 52-week highs expanded last week. This 52-week high expansion is bullish because means more stocks are in strong uptrends and leading the market.
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
52-week Highs Expand
52-week High-Low Percent is the percentage of stocks making 52-wk highs less the percentage of 52-wk lows within an index. These indicators turn bullish with a move above +10% (green bars) and bearish with a move below -10% (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 green arrows on the price chart show when 52-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.
This is a long-term timing indicator that will lag price (SPY). The lag, however, seems to be the largest with the bull signals. The bearish signal on 27-Feb-2020 was very timely, but the bullish signal did not trigger until after a sizable advance (15-June-2020). Despite a seemingly overbought condition in June 2020, the advance continued until the end of 2021. Most recently, this indicator pair triggered bullish on June 15th, 2023. SPX 52wk High-Low Percent dipped below -10% in September-October, but NDX 52-wk High-Low Percent did not confirm. Thus, the bull signal was not overturned.
Most recently, SPX 52wk High-Low Percent hit 23.66%, which is the highest level since May 2021. 52-week highs are bullish because stocks making 52-week highs are in strong uptrends and showing upside leadership. NDX 52wk High-Low Percent is not as strong here in March, but we are not seeing new 52-wk lows. Bottom line: this indicator pair is bullish and I expect the bull market to continue until proven otherwise.
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 is lagging lately. Notice that MID 4-wk High-Low Percent and SML 4wk High-Low Percent exceeded +20% last week (green ovals). This indicates that the advance is broadening to mid-caps and small-caps.
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. SPY dipped for 3 days in mid March (13, 14, 15) and then surged to another new high last week. SPY was up 27% over the 99 day period from late October to last week’s high. 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 (508.04) 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.
Chart Analysis, Setups and Trading Ideas
HUBS Consolidates above Breakout
The chart below shows HubSpot (HUBS) with a 62% advance, January breakout and 52-week high. The blue shading marks a prior resistance zone that turned into support. HUBS consolidated above this resistance zone and formed a triangle into March. I view this as a bullish continuation pattern and a breakout at 640 would be bullish. I would then mark support at 589 and re-evaluate on a close below this level.
As you can see from this chart, I am experimenting with different chart layouts. I may be adding volume and a relative strength indicator in the future. The first indicator window shows the price-relative (HUBS:RSP ratio), which compares performance against the S&P 500 EW ETF (RSP). This ratio rises when HUBS outperforms and falls when HUBS underperforms. The magenta line is the 125-day SMA. HUBS is above this moving average, which means it is largely outperforming the broader market. The ratio edged lower as the stock consolidated and a breakout here would show a return to relative strength. The volume bars are blue on up days and magenta on down days. I do not have anything to add on volume.
ILMN Pops on Good Volume
Illumina (ILMN) remains on my radar as it consolidates after a big surge. The stock surged 67% with a peak in late January. ILMN then worked its way lower with a falling channel in February-March. I view this as a correction after a strong advance. Short-term, ILMN surged last week with two days of strong volume (green oval). It fell back over the next two days and I am now watching for the follow through move. A breakout at 144.20 would be bullish and signal a continuation higher. Upon a breakout, I would mark re-evaluation support at 127.
SQ Hits Fresh 52wk High
The chart below shows Block (SQ) hitting a fresh 52-week high with a breakout in mid March. Notice that this is the first 52-week high since August 2021. It is also worth noting that 52-week highs are usually not one-off occurrences. In other words, strength begets strength and we often see more new highs in the following months. Returning to the price chart, there is a two day high volume surge in late February. This surge also triggered a breakout on the price relative (SQ:RSP ratio). The price-relative is above its 125-day SMA and SQ is outperforming overall. On the price chart, SQ held the gap and I am marking first support in the 75 area. A close below the early March low would call for a re-evaluation. Note that SQ is part of the FinTech ETF (FINX) and this group is also leading the market.
NOW Consolidates after New High
The next chart shows ServiceNow (NOW), which is part of the software group. NOW led the market from late October to mid February with a 55% advance. The stock then corrected with a falling wedge/flag into March. Also note that the Software ETF (IGV) corrected with a triangle during this time frame. NOW retraced around 1/3 of the 55% surge with a falling wedge or flag. I view this as a consolidation within a bigger uptrend, which makes it a bullish continuation pattern. The wedge high is at 807.77 on 13-March, but I am going to mark resistance using the close on 12-March (red line). A breakout at 790 would be bullish and signal a continuation higher. In the middle indicator window, the NOW:RSP ratio is in a long-term uptrend (outperforming), but it fell back over the last six weeks. A break above the mid March high (red line) would show a return to relative strength.
