The market regime remains bullish, but we are seeing corrective price action over the last few months. The Nasdaq 100 ETF started it all off with a sharp decline from mid February to early March. IWM got involved this week with its biggest fourth decline greater than 9% since March 2020. SPY has largely avoided the correction fray and remains the strongest of the big three.
The market remains defensive overall. There were flag breakouts in a number of tech and growth ETFs last week and these breakouts are failing this week. Once again, the tech and growth ETFs are leading the way lower. Even though these ETFs are down sharply over the last six weeks, the declines still look like corrections within bigger uptrends. The mid March highs provide the first resistance levels to watch going forward.
This commentary was originally posted on Wednesday, March 17th, in PDF format. Today I am replacing the PDF with chart images on a web page. Some of the text has been adjusted, but the commentary/charts are largely the same as on Wednesday. These charts cover the massive moves in tech-growth ETFs over the past year, the interest rate debate, Chinese ETFs firming in reversal zones and the Brazil ETFs surging off the 200-day.
I wrote about the Biotech ETF (IBB) on February 28th as it pulled back from a new high. The pullback was viewed as a correction within the bigger uptrend, but the correction extended further than expected. At the time, I drew a falling wedge on the chart and marked resistance with the red line at 163.
QQQ and the tech-related ETFs triggered flag breakouts last week and these breakouts were challenged with a pullback this week. Some breakouts failed (IGV) and some are at their moment of truth (IPAY). Today’s video focuses on trailing stops and breakout zones for several of these.
We finally got a bit of a shake up this week as oil fell sharply on Thursday. We also saw big declines in the Nasdaq 100 ETF and Russell 2000 ETF. It was basically triple shock Thursday with small-caps, large-techs and oil getting hit hard. Tech and growth related ETFs were also hit hard as money moved out of the high-beta end of the market.
There are lots of flag breakouts here in March. Some triggered in early March, some last week, some this week and some are still working, which means price is still near the breakout zone. There were short flag/pennants that lasted a week or so (KRE), shallow flags (IJR), falling flags that lasted three weeks (SPY) and sharper falling flags that lasted four weeks (QQQ, IBB).
As its name suggests, multiple timeframe analysis looks at two or more timeframes to find a setup. Typically, the longer timeframe is used to define the long-term trend and set the trading bias. The shorter timeframe is then used to find setups in harmony
Stocks perked up this week and we saw flag breakouts in several ETFs. Small-caps led the charge with IWM hitting a new high. QQQ even rebounded with a breakout, but is still lagging year-to-date. Strategically, the Composite Breadth Model remains in bull market mode. Tactically, the breakouts are holding and we will show how to monitor SPY and QQQ going forward. It was also a big week for Utilities and Consumer Staples,
SPY and IWM recorded new highs this week and continue to lead the broader market. Even though QQQ and XLK are underperforming this year, the old school sectors held strong and propped up SPY. After short pullbacks into early March, stocks caught a bid this week and we are seeing flag breakouts in
There are a lot of pullbacks to deal with today. Some pullbacks are shallow, some are deep and some are in between. Often, the bigger the advance, the deeper the pullback or retracement. Despite some big percentage declines, most of the pullbacks are normal in retracement terms (33 to
Two items are dominating the news right now: the rise in interest rates and decline in tech stocks. Are rising rates really an issue for tech stocks? The charts suggest that the evidence is mixed, at best. In fact, it is not very hard to find periods when tech stocks rose along with sharp rises in the 10-year Treasury yield.
Despite an increase in intraday volatility the last few weeks, the recent pullback is actually quite tame, especially for the Russell 2000 ETF and S&P 500 SPDR. QQQ bore the brunt of selling pressure and the Nasdaq 100 Breadth Thrust Model turned bearish. I am not concerned with this signal because the S&P 1500 Thrust Model remains bullish. Today’s video will show backtest results
The long-term evidence remains bullish, but the major index ETFs have moved into corrective mode of varying degrees. The S&P 500 SPDR and Russell 2000 ETF are in the midst of shallow pullbacks, while the Nasdaq 100 ETF is leading the way lower with a sharp pullback. Downside participation was so strong in the Nasdaq 100 that the Breadth Thrust
Even though ETFs related to small-caps, mid-caps, industrials, finance and energy are performing well and not part of the correction process, a big portion of the core ETF list are in some sort of pullback or correction over the last few weeks. 48 of the 119 ETFs in the core list are down over the last 22 trading days (since January 29th) and 22 are down more than 5%.
With a pullback led by QQQ and the high flyers, several ETFs have become short-term oversold in a longer term uptrend. In Dow Theory terms, the primary trend for these ETFs is up and the secondary trend is down. A secondary downtrend within a primary uptrend is considered a correction within that uptrend and a possible opportunity.
Only three of the sixty ETFs in the core list advanced this week: AGG, TLT and LQD (bonds). Everything else declined, but the biotech ETFs (IBB and XBI) declined the least of the common stock ETFs. The banking and insurance ETFs (KRE, KBE, KIE) led the way lower with the banking ETFs hitting 52-week lows.
There are Black Swan events and then there are BLACK SWAN events. The current decline, 12% in six days, ranks as one of the sharpest on record. Not counting 1929, the sharpest decline on record is the crash in October 1987, when the S&P 500 fell some 28% in 4 days.
Stocks were broad-sided as the stock market fell sharply. Even though the S&P 500 SPDR remains in the falling knife category and has yet to bounce, I am on the look out for ETFs that hold up relatively well during this onslaught. There are several ways to separate ETFs with relatively strong charts and those with relatively weak charts.
As technical analysts and chartists, we study historical prices and patterns to get an idea of what to expect going forward. No two patterns are exactly the same, but they often rhyme with a few common characteristics.
Weekend Video, Chart Notes and ChartBook Update ETF Chart Notes for Saturday, February 22nd * These chart notes are also in the ChartBook PDF file (link above) New 52-week Highs (during the week – unadjusted data) Major Index ETFs: SPY, RSP, MDY, QQQ, MTUM, USMV Sector SPDRs: XLK, XLY, XLC, XLP, XLU, XLRE Equal-Weight Sectors: …