Video and Report Headlines
- Watch IWM for Signs of Broadening Participation
- SPY Challenges Resistance
- QQQ Remains the Leader
- XLK Extends Streak to Nine Days
- Software ETF Breaks Mid October High
- Vulcan Materials Surges off Retracement
- CME Group Returns to Breakout Zone
- Micron Breaks out of Big Triangle
- Paccar Forms Extended Wedge Correction
The next Chart Trader will be posted on Tuesday, November 14th.
Stocks surged from October 30 to November 3rd (last week) and then diverged the last three days. SPY and QQQ edged higher, while mid-caps (MDY) and small-caps (IWM) fell. Over the last three days, SPY is up .59% and QQQ is up 1.42%. In contrast, MDY is down 1.71% and IWM is down 2.65%. This is the story of 2023. SPY and QQQ are up double digits year-to-date, MDY is up a fraction (.56%) and IWM is down 2.58%. It is still a large-cap world with large-cap techs leading the way.
Zweig Breadth Thrust Report
Programming Note: I will post a report on Friday Saturday morning. This report will cover the Zweig Breadth Thrust, which triggered on November 3rd. We will look at past signals and show how to trade the current signal. I will also weigh in on a long-term breadth indicator that did not confirm the Zweig Breadth Thrust.
Watch IWM for Signs of Broadening Participation
The Russell 2000 ETF (IWM) surged for five days and then fell back over the last three days. The bigger trend is down with the mid October high marking resistance. Short-term, the 3-day pullback could be a bull flag. A move above Wednesday’s high would trigger a short-term breakout and we could then see a bigger resistance challenge at 177. A flag breakout would also signal increasing participation in the current advance. This would be a positive for breadth and increase the chances for an extended advance into yearend.
SPY Challenges Resistance
There is no change in SPY. The ETF formed a falling channel and reversed near two key retracements. SPY broke the channel line with a surge last week and edged higher this week. The ETF is on the verge of breaking its October high and this would open the door to a challenge to the August highs. Short-term, SPY is overbought after a 6% surge in nine days.
QQQ Remains the Leader
The Nasdaq 100 ETF (QQQ) is the strongest of the major index ETFs, by far. SPY is second and the rest are far behind (RSP, MDY, IJR, IWM, IWC). The chart below shows QQQ with a 50% advance and a correction that retraced 33%. A falling channel formed and QQQ surged the last two weeks. This move broke the channel line and QQQ is challenging the mid October high. A breakout would signal a continuation of the bigger uptrend.
The indicator window shows the Nasdaq 100 Trend-Breadth Model, which uses the same indicators and settings as the S&P 500 and S&P 1500 Trend Breadth Models. It turned bullish on February 3rd and remains bullish. Note that this is a 5-day SMA of the Trend-Breadth Model, which is why we see fractional numbers. In contrast to the Nasdaq 100, the S&P 500 and S&P 1500 Trend-Breadth Models are negative.
Chart Analysis, Setups and Trading Ideas
XLK Extends Streak to Nine Days
The Technology SPDR (XLK) is leading with a breakout four days ago and a nine day winning streak. The nine day advance is the largest since November 2022 and the nine day winning streak is the most since September 2nd, 2020. XLK is short-term overbought, but the breakout is bullish and extending. The red stair-step line on the right shows the ATR Trailing Stop (4,22). This stop is 4 ATR(22) values below the highest close since the breakout. It will trail higher as long as prices continue higher. A close below 164.71 would call for a re-evaluation.
Software ETF Breaks Mid October High
The Software ETF (IGV) is showing upside leadership because it broke its October high. Overall, the ETF surged some 50% and then consolidated with a falling wedge from August to October. IGV is breaking out of this wedge and this signals a continuation higher. Short-term, IGV is overbought, just like QQQ and XLK. Overbought conditions could give way to a pullback or consolidation.
Vulcan Materials Surges off Retracement
The next chart shows Vulcan Materials (VMC) with a falling channel correction after a 43% advance. Note that VMC hit a 52-week high in August. Overall, the 43% advance represents two steps forward and the 50% retracement is one step backward. The decline formed a falling channel and returned to the May consolidation (blue shading). Short-term, VMC surged with the rest of the market and is challenging the upper line of the falling channel. A follow through advance would trigger a channel breakout and we might then see a break above the mid October high.
Micron Breaks out of Big Triangle
Micron Technology (MU) is leading within the semiconductor group because it exceeded its August-October highs. It is still below its June high, but the overall chart is bullish. MU surged some 54% and broke resistance in May. The stock then retraced 50% of this advance with a decline to around 60. Trading then turned choppy as a triangle formed. This triangle is a consolidation after a big advance, which makes it a bullish continuation pattern. The recent surge and breakout ends this consolidation period and signals a continuation higher. Short-term, MU is overbought after a 12% surge. Also notice that the stock is quite volatile with big surges and big pullbacks. This means it may be prudent to wait for a pullback.
Paccar Forms Extended Wedge Correction
Paccar (PCAR) led the market higher in early summer with a 31% surge to new highs in June-July. The stock then moved into a trading range that formed a slightly falling wedge. A consolidation after a new high and strong advance is a bullish continuation pattern. As such, I would expect a breakout and new highs.
CME Group Returns to Breakout Zone
The next chart shows CME Group (CME) with a market leading surge in October and a 52-week high. CME broke resistance and then return to this zone as it retraced 50-67% (blue shading). A falling wedge formed in the process and I view this as a bullish continuation pattern. A break above Monday’s high would be bullish and signal a continuation higher.
