Video and Report Headlines
- Bull Market Sequence
- 4-week High-Low Percent Remains Bullish
- SPY Establishes Short-term Support
- The Mag7, the 50-day and the 200-day
- COPX Forms Wedge Correction
- XME Returns to Prior Breakout Zone
- EA Breaks Out and Hits New High
- MDY, IPAY, IBB and IOT Follow Up
The next Chart Trader will be posted on Thursday morning, February 29th.
Bull Market Sequence
Links: Zweig Breadth Thrust and Composite Breadth Model
4-week High-Low Percent Remains Bullish
Even though the percentage of stocks above the 50-day SMA continues to deteriorate, 4wk High-Low Percent triggered bullish on January 29th and remains bullish. The chart below shows SPX %Above 50-day SMA exceeding 80% from December 1st to January 16th (yellow shading). This indicator peaked at 91.45% on January 2nd and fell to 61% over the last few weeks. SPY paid no heed and extended its advance.
The bottom window shows 4wk High-Low Percent, which is the percentage of stocks making 4wk highs less the percentage making 4wk lows. This short-term breadth indicator is better suited for timing the swings. It triggered bearish with a move below -20% on January 17th (red arrow), but then popped back above +20% on January 29th to turn bullish (green arrow). At this point, the indicator remains with a bull signal. A move below -20% would turn it bearish again.
SPY and QQQ Remain in Strong Uptrends
There is no change on the SPY chart. The ETF is in a strong uptrend since the early November breakout. There are two parts to this uptrend. First, we have the initial 10% surge in 17 days to trigger the breakout (27-Oct to 20-Nov). Second, there is a uptrend over the last 62 days. The green lines mark short-term supports from pullbacks in early January, early February and mid February. Each pullback led to a new high. Current support is set at 490 and there is no sense talking correction until SPY breaks short-term support.
The next chart shows QQQ surging to 440 and hitting a new high last week. The late February dip and bounce established support in the 425 area. I am going to use last week’s low and a buffer to mark support at 420. There is no sense talking about a correction until QQQ breaks short-term support and reverses the short-term uptrend.
Chart Analysis, Setups and Trading Ideas
The Mag7, the 50-day and the 200-day
The CandleGlance chart below shows S&P 500 SPDR (SPY), the S&P 500 EW ETF (RSP) and the Mag7 stocks with their 50 and 200 day SMAs. SPY and RSP hit new highs last week and are well above both SMAs. Four of the seven are above both SMAs and three hit new highs last week (AMZN, META, NVDA). While these four are powering the group as a whole, note that three of the four (43%) are below their 50-day SMAs (AAPL, GOOGL, TSLA). Two are below their 200-day SMAs (AAPL, TSLA) and one has a death cross (TSLA).
Even though it is not all peaches and cream in Mag7 land, the Mag7 ETF (MAGS) hit a new high last week. According to the fact sheet, this ETF is rebalanced every quarter, which means all seven stocks were equally weighted on January 1st (~14.28% each). These weighting change based on performance throughout the quarter. MAGS is at a new high because NVDA, META, AMZN and MSFT are driving performance. There respective weightings have also increased with NVDA accounting for some 20% of the ETF.
COPX Forms Wedge Correction
Pretty much everything moved higher from late October to mid-late December and participation (breadth) was broad at yearend. Participation deteriorated in 2024 as fewer stocks and ETFs moved higher. The Copper Miners ETF (COPX) is one of the laggards in 2024, but I am seeing a potentially bullish pattern on the price chart. First, COPX advanced 55% into April and then retraced around 2/3 with a falling wedge into November. The ETF broke out in November and advanced 23% into late December. COPX then corrected in 2024 with a falling wedge that also retraced around 2/3 of the prior advance. I view this wedge as a bullish continuation pattern and a breakout at 36.5 would signal a continuation of the 23% advance. Upon a breakout, I would mark first support at 34.
XME Returns to Prior Breakout Zone
The next chart shows the Metals & Mining SPDR (XME), which in an industry related to copper mining. XME is dominated by steel stocks because they account for 57% of the ETF. On the price chart, XME surged 29% from October to December and hit a new high. It was leading the market at Christmas and then corrected in 2024. This correction retraced 50-67% of the prior decline and also formed a falling wedge. Both the retracement amount and pattern are typical for corrections after big advances. Also notice that XME returned to the prior resistance zone in the 54 area (blue shading). Short-term, XME surged in mid February and fell back last week. A follow through breakout at 57.5 would be bullish and signal a continuation of the bigger uptrend.
EA Breaks Out and Hits New High
Electronic Arts (EA) is part of the Communication Services SPDR (XLC) and the video gaming industry group. This stock is a leader because it is in a strong uptrend and hit a 52-week high in mid February. For example, the average stock in the S&P 500 is 8.03% above its 200-day SMA and this stock is 9.33% above its 200-day. On the price chart, EA hit a new high in mid December with a 20% advance. The stock then corrected with a falling flag/wedge that retraced 33-50 percent. EA broke out of this pattern with a surge in mid February and this breakout is bullish. The mid February low marks re-evaluation support at 136.
MDY, IPAY, IBB and IOT Follow Up
The next charts show the ATR Trailing Stop for some setups and breakouts that were featured earlier this month. The general idea is to show how the ATR Trailing Stop works as the trade evolves. This stop rises when prices rise and flat-lines when prices fall. It is designed to participate in an advance and contain losses should prices fall a certain amount (usually 2 ATR(22) values from the highest close since the breakout). This means the stop will give up some gains before triggering. The first chart shows MDY with the flag breakout and the ATR Trailing Stop at 507.88.
The next chart shows the Biotech ETF (IBB) with a flag breakout on February 15th and the ATR Trailing Stop at 134.94.
The next chart shows the Mobile Payments ETF (IPAY) with a breakout on February 8th and the ATR Trailing Stop at 47.59.
The next chart shows Samsara (IOT) with a triangle breakout on February 8th and the ATR Trailing Stop at 31.46.
