Video and Report Headlines
- 4wk High-Low Percent Remains Bullish
- SPY and QQQ Maintain Stair-Step Advance
- XLC Leads Sectors
- XLK, SKYY, IGV and CIBR Consolidate
- SOXX Holds Up the Best
- AMD Firms at 33% Retracement
- FTNT Surges within Bull Flag
- LLY Consolidates near New High
- HPE Breaks Out of Long-term Consolidation
The next Chart Trader will be posted on Tuesday morning, April 9th.
IWM Still Lagging
Stocks fell on Tuesday and then recovered somewhat on Wednesday. Overall, SPY is leading the market with the strongest short-term uptrend. QQQ stalled since March 1st, but this is just a consolidation within a bigger uptrend. Small-caps remain the weakest links because the Russell 2000 ETF (IWM) is back at its late December high. IWM has little to show here in 2024. It is still a large-cap dominated market. Short-term, the 4wk High-Low Percent indicators remain bullish and support the short-term bullish environment.
Links: Zweig Breadth Thrust [7] and Composite Breadth Model [3]
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). NDX 4wk High-Low Percent dipped to around -15% the last two days, while SPX 4wk High-Low Percent was largely flat (near 0). Nasdaq 100 stocks were less strong than S&P 500 stocks in March and Nasdaq 100 stocks are weaker than S&P 500 in April. NDX 4wk High-Low Percent has yet to trigger bearish though.
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 Stair-Step Advance
SPY continues to stair-step higher with short pullbacks followed by new highs. SPY fell below 520 with a gap on Tuesday, but this is just short-term noise. This advance is littered with short-sharp pullbacks and SPY recovered after each one. A pullback will matter when SPY does not recover and suffers an outsized decline. 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 were less than 3 ATR(22) values. A close below this line (510.26) would signal a pullback that is more than 3 ATR(22) values. This would be deemed an outsized decline and show the most selling pressure since October. This could also signal the start of a corrective period. Notice that SPY experienced an outsized decline on August 9th (3 ATR drop) and this signaled the start of a correction.
QQQ hit a new high in late February, formed a pennant and broke out on March 20th. There was no follow through to this breakout and QQQ fell around 1% on Tuesday. QQQ is basically flat since March 1st, which is when it first exceeded 440. At this point, I view this as a consolidation within a short-term uptrend. I am also using the ATR Trailing Stop (3 x ATR(22)) to define the short-term uptrend in QQQ. QQQ broke this line in early January and then surged to a new high. This line then held in February and March. A close below 429.59 would signal and outsized decline and show the most selling pressure since early January.
The weight of the short-term evidence is bullish and I am watching four items for signs of a short-term reversal. These are 4-wk High-Low Percent for SPX and NDX, as well as the ATR Trailing Stops for SPY and QQQ. The short-term environment would turn bearish should all four trigger. Until then, the weight of the evidence remains bullish for the short-term.
Chart Analysis, Setups and Trading Ideas
XLC Leads Sectors
The Energy SPDR (XLE) is getting all the attention because it is up 20% since mid January and trading at a new high. XLE is indeed strong and showing leadership, but its trend is hardly as consistent as that for the Communication Services SPDR (XLC). The chart below shows XLE with a breakout in mid February and sharp move higher. Despite surging 20%, XLE is just now starting to outperform the S&P 500 EW ETF (RSP).
The next chart shows the Communication Services SPDR (XLC) hitting a new high on Wednesday. Note that XLE also hit new highs in December, January, early February and late March. XLC has also been above its rising 125-day SMA for most of the last twelve months. Most recently, XLC broke out of a consolidation in late March and this signals a continuation of the bigger uptrend.
XLK, SKYY, IGV and CIBR Consolidate
The Technology SPDR (XLK) and several groups within Technology are going through a consolidation process. After leading the market from November to January, the advance slowed in February and turned into a consolidation in March. These are consolidations within bigger uptrends, which makes them bullish continuation patterns. The classical signal is a consolidation breakout. The chart below shows XLK closing above 208 on February 8th (+30%) and ending at 207.39 on Wednesday, April 3rd. It has gone nowhere for almost two months. This is just a rest within the bigger uptrend and a breakout would signal a continuation higher.
Technically, a support break would be short-term bearish, but this would not be a tradable signal because the bigger trend is up. A support break would just increase the odds of a deeper correction or pullback, perhaps to the 195 area. The next chart shows the Software ETF (IGV) with a 36% advance into mid February and a falling channel pullback. This is a mild correction within a bigger uptrend. A break above the mid March high would signal a continuation higher. There is support in the 81 area (green shading) and the rising 125-day SMA will soon reach 80.
The next chart shows the Cybersecurity ETF (CIBR) with a similar pattern.
The next chart shows the Cloud Computing ETF (SKYY) with a possible Ascending Triangle, which is a bullish continuation pattern. A break above the March highs would confirm this pattern and signal a continuation higher. While a break below the March lows would be short-term negative, it would just lead to the next short-term setup because the bigger trend is up. The February low and 33% retracement mark a Support-Reversal Zone in the 87-88 area (green shading).
SOXX Holds Up the Best
The Mobile Payments ETF (IPAY) and FinTech ETF (FINX) are the strongest of the tech-related ETFs right now as both hit 52-week highs in March. The Semiconductor ETF (SOXX) hit a 52-week high in early March and then fell back with a steep falling wedge. SOXX broke out with a gap-surge on March 21st and this breakout is holding. A close below 220 would negate the short-term breakout. While a failed breakout would be short-term negative, the long-term trend is up and any pullback would just lead to the next bullish setup.
AMD Firms at 33% Retracement
AMD led the market from late October to early March with a 100+ percent advance. The stock then fell back to the 180 area and retraced around a third of this monster move. Notice that AMD formed a pennant in February and broke out around 180. This broken resistance zone also turns into support. Thus, AMD is trading at a potential Support-Reversal Zone marked by the pennant breakout and 33% retracement. The stock firmed the last week or so and a break above Monday’s high would be short-term bullish.
There is also a short-term bearish alternative on this chart. AMD fell from 220 to 178 and then consolidated. A break below Tuesday’s low would be short-term bearish and argue for a deeper pullback. Again, this would still be a pullback within the bigger uptrend. The next Support-Reversal Zone is around 160. The pennant lows and the 50% retracement mark this zone.
FTNT Surges within Bull Flag
The next chart shows Fortinet (FTNT), which is part of the Cybersecurity ETF (CIBR). FTNT advanced around 50% from early November to early February and then embarked on a consolidation, like the rest of the group. A falling flag or channel formed and this is a consolidation within a bigger uptrend. Note that I am ignoring the over-reaction on February 21st (yellow shading). FTNT caught my eye because it surged on good volume and is outperforming since December. A flag breakout would signal a continuation of the bigger uptrend and target new highs. A close below the March lows would negate this setup.
LLY Consolidates near New High
The next chart shows Eli Lilly (LLY) within a strong uptrend and hitting new highs earlier this year. Notice that the stock broke out of an extended triangle in early January and surged some 40%. LLY then consolidated over the last two months with a trading range. This is a consolidation within an uptrend and a breakout at 800 would be bullish. The first indicator window shows the price-relative (LLY:RSP ratio) in a long-term uptrend and short-term pullback. The lower window shows volume for reference.
HPE Breaks Out of Long-term Consolidation
The next chart shows Hewlett Packard Enterprises (HPE) breaking out to new highs with a move above 18. The stock was dead money from April 2021 to March 2024 (three years). This might be changing with the breakout on high volume. Note that HPE is an Infrastructure as a Service (IaaS) company that recently acquired Juniper Networks. HPE is a one-stop shop for servers, data storage, software, networking and network security. Competitors include DELL and NTAP. HPE could play a role in demand for AI infrastructure. Returning to the price chart, HPE broke out with a 15% surge in early March. This move occurred on high volume as well (green arrows). Price action turned volatile after this surge, but HPE moved back above the red resistance zone this week. Volatility is above average because this is a low priced stock (~18). The March dip and rebound established first support at 16.5 and a close below this level would argue for a re-evaluation.
