Video and Report Headlines
- Small-cap Breadth Comes to Life
- SPY Hits New Closing High
- Small-caps Picking up the Slack
- XLV Breaks Out of Pennant
- XBI Returns to Breakout Zone
- XLK Underperforms as SOXX Holds Gap-Breakout
- IDXX Pulls Back after 52-week High
- HON Finds Some Mojo
- MARA Reverses Downswing
The next Chart Trader will be posted on Tuesday morning, April 2nd.
Small-cap Breadth Comes to Life
The first chart shows 4wk High-Low Percent for the S&P 500, Nasdaq 100, S&P MidCap 400 and S&P SmallCap 600. There is a detailed explanation below the chart. This SPX/NDX combo turned bullish on November 2nd and remains bullish. A bearish signal would trigger when both SPX and NDX 4wk High-Low Percent exceed -20%. SPX 4wk HLP hit 37% on Wednesday, its highest level since mid December. This means the rally is broadening. Also notice that MID 4wk HLP hit 38% and SML 4wk HLP hit 30.5% (green ovals). Money is moving into other parts of the market.
SPY Hits New Closing High
There is no change on the SPY and QQQ charts. SPY rose .8% on Wednesday and recorded a new closing high, although it is still below last week’s intraday high. No biggie. The ATR Trailing Stop (3xATR(22)) defines this advance as it held throughout (since early November). A close below 510 would mark a decline greater than 3xATR22 values and this would be an outsized decline. Such a move would show the most selling pressure since October and could signal the start of a corrective period.
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
Small-caps Picking up the Slack
The next chart shows the Russell 2000 ETF (IWM) breaking out to a 52-week high in late December, correcting in January and then working its way higher the last two months. The long-term and short-term trends are up and IWM is close to another 52-week high (intraday). Despite this uptrend, IWM is not outperforming the S&P 500 EW ETF (RSP). The bottom window shows the IWM:RSP ratio moving sideways for over a year. Also note that RSP is around 8% above its February 2023 high and IWM is 5% above its February 2023 high. IWM is bullish overall, but hardly a leader.
XLV Breaks Out of Pennant
The next chart shows the Healthcare SPDR (XLV) breaking out to a new 52-week high in January, forming a pennant and breaking out again in February. The ETF surged to another 52-week high, formed another pennant and broke out with a gap-surge on Wednesday. This breakout is bullish as long as the gap-surge holds. A close below 145 would call for a re-evaluation. The indicator window shows the price-relative (XLV:RSP ratio) trading flat over the past year. Even though XLV surged with the rest of the market from October to February, it did not outperform RSP during this surge. Keep this in mind: the actual price can rise even while the price-relative is flat or down.
XBI Returns to Breakout Zone
The next chart shows the Biotech SPDR (XBI) tagging a 52wk high in early January, forming a triangle and surging to another new high in February. XBI fell back in March and returned to the breakout zone, which turns support. Also note that the March decline retraced around 2/3 (66.7%) of the 21% advance (Jan-Feb). This combo creates a Support-Reversal Zone to watch. A falling channel/flag formed in March and a close above 96 would break short-term resistance. I would then set re-evaluation support at 92 (green line). Note that XBI is stronger than the Biotech ETF (IBB) and showing some relative strength since early November.
XLK Underperforms as SOXX Holds Gap-Breakout
Tech stocks are in a bit of a malaise the last two months. The Software ETF (IGV), Cloud Computing ETF (SKYY) and Cybersecurity ETF (CIBR) remain below their February highs. The Semiconductor ETF (SOXX), FinTech ETF (FINX) and Internet ETF (FDN) are holding up better as these three hit new highs in March. The Technology SPDR (XLK) is caught in the middle. XLK hit a new high on March 1st and then traded flat. The overall trends are up with the March lows marking first support at 204. A break here would reverse the short-term uptrend and call for a correction in the biggest sector. XLK accounts for 29.63% of SPY. The red line marks the 125-day SMA. The indicator window shows XLK underperforming RSP since early February. This is not drastic underperformance and we have seen periods of underperformance during the amazing run since January 2023 (red arrows).
The next chart shows the Semiconductor ETF (SOXX) hitting a new high in early March and pulling back with a small falling wedge. SOXX broke out with a gap surge last week and this breakout is holding. A close below 220 would fill the gap and negate the breakout. Short-term support is marked with the mid March low at 212. A close below this level would reverse the short-term uptrend and argue for a corrective period.
IDXX Pulls Back after 52-week High
The perfect setup is often hard to find, especially when using indicators and price together. The IDEXX Lab (IDXX) chart shows price with the price-relative (IDXX:RSP ratio) and volume. The ideal setup would be a bullish breakout/setup on the price chart, a bullish breakout or relative strength with the price-relative and volume backing the move. IDXX has a bullish setup on the price chart, but I do not see much from the price-relative and volume. IDXX hit a 52-week high in February, which means the long-term trend is up. The stock was also showing some upside leadership in early February, but then pulled back in March. IDXX remains above support from the January lows (green shading) and could be forming a higher low (green dashed lines). The swing in March is down with the red line marking short-term resistance at 542. IDXX gapped up and advanced 1.7% on Wednesday. A follow through breakout at 542 would fully reverse the March downswing. I would then use the March lows to mark re-evaluation support.
HON Finds Some Mojo
The Industrials SPDR (XLI) is performing great with a 30% advance since late October and showing relative strength. Honeywell (HON), its fifth biggest component (5.5%), is lagging and not partaking. Until now. The chart shows HON with a 20% advance into December and a sharp decline into early February. This decline returned to the 125-day SMA and retraced around 50% of the advance. HON then moved into a triangle consolidation and broke out with a surge the last two days. I view this breakout as bullish and will mark re-evaluation support at 197 (green line).
MARA Reverses Downswing
This next stock is the exact opposite of Honeywell, which is an old school industrial. Marathon Digital Holdings (MARA) is an American digital asset technology company, which engages in mining cryptocurrencies, with a focus on the blockchain ecosystem and the generation of digital assets. This alone tells me that this stock has above average volatility and risk. Also note that the stock fell from 34 to 20 (41%) in March, and is still above its rising 125-day SMA. Overall, MARA surged to a 52-week high in December, fell sharply in January and then returned to this high in late February. The stock fell sharply in March, but firmed above the January lows and broke short-term resistance with a surge last week. This breakout is holding and upside volume was above average (green oval). A close below 20 would negate this breakout and call for a re-evaluation. This level is 10% below current prices.
