Video and Report Headlines
- Zweig Breadth Thrust Update
- Semis, Tesla and Alphabet Start to Lag
- QQQ Breaks Short-term Support
- SPY Stalls Near Summer High
- Tesla Hits Resistance-Reversal Zone
- Vertex Firms at Support
- Northrop Grumman Breaks Out
- LMT Forms Bullish Continuation Pattern
I will post a System Trader report on Friday, December 8th.
The next Chart Trader will be posted on Tuesday morning, December 12th.
SPY and QQQ are in long-term uptrends as both recorded 52-week highs over the last few weeks. Small-caps are in long-term trading ranges, but short-term uptrends as IWM and IJR surged the last six weeks. Overall, stocks are short-term overbought and we are seeing relative weakness in large-caps techs over the last two weeks. This is a short-term issue because the tech sector, large-cap tech stocks and QQQ are leading long-term. Even so, short-term weakness in QQQ and the tech sector could foreshadow a corrective period to work off overbought conditions.
The PerfChart below shows year-to-date performance for SPY, QQQ, IWM and the six biggest sectors. Tech-related names are driving the gains (QQQ, XLK, XLC, XLY). I include XLY because AMZN and TSLA are the biggest holdings and account for over 40% of the ETF.
The chart below shows SPX OBOS5 hitting +4 and becoming overbought on December 1st. SPX %Above 20-day SMA remains at 75% and has yet to turn down. SPY is also holding short-term support at 453. A support break at 453 or a move below 40% in SPX %Above 20-day SMA would signal the start for a corrective period.
Zweig Breadth Thrust Update
The chart below shows SPY with the Keltner Channel and the S&P 1500 Zweig Breadth Thrust (ZBT1500) in the indicator window. A ZBT1500 signal triggered on November 3rd as the 10-day EMA of S&P 1500 Advance-Decline Percent surged from below -20% to above +23% in less than ten days (green bar). The green arrows on the price chart show prior signals. The red arrows show subsequent moves below the lower Keltner Channel. ZBT1500 signals in January 2019 and May 2020 worked out quite well (green dashed line). We did not get a ZBT1500 signal between October 2022 and July 2023. The November 3rd signal is valid as long as the 5-day SMA of SPY (blue line) holds the lower line of the Keltner Channel (65,2,65). This lower line is currently at 431.80. See this article for more details on these signals.
SPY Stalls Near Summer High
Spy surged some 12% and tagged its July high on December 1st. The ETF exceeded 455 on November 22nd and then stalled the last nine days. The lows of the last two weeks mark short-term support at 453 and a break here would reverse the short-term uptrend. SPY also did the pop and drop on Wednesday with a strong open and weak close. The ETF formed a long black candlestick that engulfed the prior candlestick. Further downside would confirm this bearish engulfing pattern. As with QQQ, I am using broken resistance and the 33-50 percent retracement zone to mark a downside target.
QQQ Breaks Short-term Support
QQQ is starting to lag as money moves into other areas of the market. QQQ is still leading long-term because it was the first to hit a 52-week high (November 20th). QQQ is lagging short-term because it broke short-term support with a sharp decline on Monday. This puts the ETF in pullback mode with the support-reversal zone set in the 368-377 area. Broken resistance turns support (red shading) and the 33-50 percent retracement resides here as well (blue shading).
Chart Analysis, Setups and Trading Ideas
Semis, Tesla and Alphabet Start to Lag
Cisco (CSCO) did not partake in the market surge over the last six weeks, but is firming in a support-reversal zone. The stock advanced some 50% from October 2022 to August 2023 and hit a 52-week high. CSCO fell from this high and then gapped down after announcing its acquisition of Splunk (SPLK). The stock gapped down again after earnings on November 15th. Overall, the decline since September retraced 50-67 percent of the prior advance. CSCO also returned to support from the January-May lows (green shading). Support and the retracement zone mark a support-reversal zone. The stock firmed the last few weeks and a breakout at 49 would reverse the short-term downtrend.
Tesla Hits Resistance-Reversal Zone
Telsa (TSLA) was up around 20% in November, but this advance is still within a bigger downtrend and the stock is hitting a resistance-reversal zone. The red dashed lines define the downtrend since July. Note that QQQ exceeded its July high and TSLA did not even exceed its October high. Tesla is underperforming and showing relative weakness. The July trendline marks potential resistance and the November bounce retraced around 2/3 of the prior decline. This is the resistance reversal zone. Also notice that a rising wedge formed and this pattern is typical for counter-trend bounces. The early December low marks support at 232 and a break here would be bearish.
Vertex Firms at Support
Vertex (VRTX) hit a new high in early November and then got slammed in mid November. The stock fell to support from the August-September lows and firmed the last few weeks. Overall, the long-term trend is up with a rising channel taking shape. VRTX is also firming at the lower line of this channel. The resolution of this consolidation would dictate the next move. A break above the late November high would be bullish and keep the uptrend alive. A break below the late November low would be bearish. I would be more inclined to expect an upside breakout because the long-term trend is still up.
Northrop Grumman Breaks Out
Northrop Grumman (NOC) is part of the Aerospace & Defense ETF (PPA), which represents one of the strongest industry groups. The stock is lagging its group, but shows promise with a recent wedge breakout. NOC was first featured on November 14th as it tested support. NOC broke resistance with a big surge in October and then returned to the breakout zone with a falling wedge into mid November. The decline also retraced 50% of the prior advance. Broken resistance and the retracement combine to mark a support-reversal zone in the 460 area. NOC turned up the last few weeks and broke out. This signals a continuation of the October surge and I would re-evaluate on a close below 464.
Lockheed Martin Forms Bullish Continuation Pattern
Lockheed Martin (LMT) is lagging its group and the market since early November, but the stock sports a bullish continuation pattern. LMT surged some 17% and then formed a pennant the last few weeks. A consolidation after a strong advance is typically a bullish continuation pattern. I am setting resistance at 453 and a breakout here would be bullish. Should we get a breakout, I would set support at 442 and re-evaluate on a close below this level.
