Dozens of ETFs became short-term oversold last week and most of these bounced this week. A combination of bullish seasonal patterns (turn of the month), short-term oversold conditions and longer-term uptrends paved the way for this bounce. Despite these bounces, stocks in general still seem ripe for a corrective period and February is historically one of the weaker months.
This week we saw flag breakouts in the DB Energy ETF (DBE) and several oil related ETFs. Tech-related ETFs continued their leadership role with new highs in the Software ETF (IGV), Cloud Computing ETF (SKYY) and Internet ETF (FDN). The Home Construction ETF (ITB) and Silver ETF (SLV) are holding their breakout zones and remain bullish. We are also seeing REITs perk up as the Real Estate SPDR (XLRE) challenges the highs of a seven month trading range and the Residential REIT ETF (REZ) holds its wedge breakout.
Things are shaking up in the intermarket area. The Dollar is getting a strong oversold bounce, while Gold and Treasury bonds are breaking down further. Stocks and the Dollar were negatively correlated, but stocks are so far shrugging off Dollar strength. Oil is also not paying attention to a stronger Dollar just yet. Keep an eye on the individual charts for signals.
I am trying something different with the charts by placing the comments to the right of the chart. This seems to make it easier to switch between the comments and the charts when reading on the website. The ChartBook may be different because of the conversion to PDF. Feedback is always appreciated: support@trendinvestor.com
Leader with Strong Uptrend
SKYY, PBW, TAN, MJ, XBI, TIP
Flag Breakout and New High
XLC, IGV, FDN, IBB, DBA
ETFs in this next group broke out of short-term bullish continuation patterns and extended after these breakouts. They are at or near new highs and leading overall. ETFs that have already broken out or gotten an oversold bounce are simply resuming their overall uptrends, and in the trend-monitoring stage. This is when I just monitor price action, consider a stop-loss or exit strategy and wait for the next setup.
New High, Held Channel, Did not Get Oversold
IJR, IWM
New High, Channel Break, Oversold Bounce
RSP, SPY, MDY, QQQ, XLK, HYG
The next group of ETFs broke the lower line of the rising channel and RSI dipped into the oversold zone. As such, they experienced a little more selling pressure than IWM and IJR above. In reality, there is not a big difference in the charts and angled trendlines are VERY subjective. While we can surely find instances where trendline breaks resulted in big reversals, we can probably find just as many that did not amount to much. All six of the ETFs in this group got oversold bounces the last few days with QQQ and XLK (tech) leading.
Consolidation Breakout
ITB, SLV
Pullback from New High, Oversold Bounce
XLF, KRE, XLB, IPAY, FINX, IHI, XAR
The next group of ETFs hit new highs recently, corrected, became short-term oversold and bounced the last few days. The pullbacks were different. XLF, DBB and XLB pulling back rather hard and then bouncing, while IPAY, FINX and XAR consolidated more and then bounced.
Oversold Bounce and Flag Breakout
DBE, XLE, XES, XOP, AMLP, FCG, KRE
Oversold Bounce after Outsized Decline
SOXX
Pullback from New High, Short-term Oversold
XME, DBB
Slow Grinding Uptrend
XLV, IHF, PHO
ETFs from here are lagging over the last few months or in downtrends. Note the gold and Treasury bonds are the weakest of all right now.
Trading Range since June, but Challenging Resistance
Showing Signs of Life
XLRE, REZ
Other ETFs and Groups:
Uptrend, but Below November High and Lagging: XLI, XLU
Uptrend, but Going Nowhere since September: XLP
Downtrend, But Getting Oversold Bounce this Year: UUP
Flat Since August and Near October Lows: LQD
Downtrend Since August
TLT, AGG, GLD, GDX
