Overextended its an incredibly nebulous term. Many ETFs were considered overextended last week and simply became even more so as strong buying pressure persisted. This is a classic case of becoming overbought and remaining overbought because the uptrend is strong. These ETFs, which are in the first few groups, are in the trend-monitoring phase.
The Consumer Discretionary SPDR (XLY), Semiconductor ETF (SOXX) FinTech ETF (FINX), Nasdaq 100 ETF (QQQ) and Technology SPDR (XLK) are leading the way with fresh new highs this week. The S&P 500 SPDR (SPY), Consumer Staples SPDR (XLP) and Healthcare SPDR (XLV) also joined the parade. This is a pretty broad grouping of new highs.
As far as fresh breakouts are concerned, we saw small flags in late August and breakouts in IWM, XLI, IJR and RSP. These breakouts are holding and bullish until proven otherwise. See the charts for the “otherwise”. The precious metals related ETFs are also showing signs of breakouts with the Gold SPDR (GLD) moving out of its pennant.
There was also a shift into bond and bond-proxies this week. TLT, AGG and LQD became short-term oversold last week and broke out with surges the last three days. Strength in bonds carried over to XLU, which broke out of a flag with an outsized move. XLRE and IYR traced out another Bollinger Band squeeze and broke out.
Elsewhere, the Biotech ETF (IBB), which overshot its ideal correction target, perked up and broke out of a falling wedge. XBI also has a bullish wedge working, while XME and REMX have bull flags.
I would encourage you to check out the annotated chartbook, which is linked above. The charts are grouped according to their trend/pattern characteristics. In addition, the commentary is on the charts for easy access and there are plenty of annotations.
The charts below are linked to an equivalent StockCharts chart.
ETF Scatter Plot and Ranking Table
The scatter plot shows dozens of ETFs in the upper right (green) with StochClose above 90. These ETFs are in strong uptrends. 13 have RSI values above 80 and are quite strong, if not quite extended (XLK, QQQ, SPY, MTUM, FDN, SKYY, FINX, XLP, VIG, USMV, IHI). There are even four ETFs with RSI below 40, but they are in strong downtrends (XLE, XOP, AMLP, FCG). Overall, ETFs in the red zone are lagging and the weakest.
See this article to learn more about the StochClose indicator.
The blue zone shifted to the right a little as ETFs that were mildly oversold got bounces. These means RSI moved higher. These include the bond ETFs (TLT, AGG, LQD) and the biotech ETFs (IBB, XBI). The precious metals related ETFs are also in this category with RSI moving just above 50 (GDX, GLD, SLV).
1) Early July Breakout, Strong Extension, New Highs
XLY, SOXX, HACK, FINX, BOTZ, TAN, XLB
2) Early August Breakout, Strong Extension, New Highs
QQQ, XLK, XLC
3) Mid-Late August Breakout, Strong Extension, New Highs
FDN, MTUM, IGV, SKYY
4) Early July Consolidation Breakout, New Highs, Short Stall
ITB, XHB, XRT
5) Early July Breakout, Slower Extension, New Highs
SPY, IPAY, XLP, VIG
6) Mid August Breakout, Stall, Extension, New High
XLV, IHI
7) Bullish Consolidation and Mean-Reversion after New High
GDX, GLD, SLV
8) Bullish Pullback, Breakout, No New High Yet
IWM, XLI, MDY, IJR, IHF, RSP
9) Early-Mid July Breakout, Extension, Short of New High
USMV, IEMG, EFA, PFF, HYG
10) Bullish Consolidation/Pullback above 200-day
IBB, XBI, REMX, XME, TLT, AGG, LQD
11) Short-term Breakout, Below June High, Near 200-day
XLU, XLRE, IYR, XLF
12) Short-term Breakout, Below June High, Below 200-day
XAR, KIE, KRE, KBE, REM
13) Reversal at Fibs, Channel/Wedge Break, Below 200-day
XLE, XES, XOP, FCG, MJ, AMLP
