Weekend Video and Chartbook – Post Breakout Moves, Strong Participation, Tech Retakes the Lead, Short-term Consolidation Breakouts

Today’s video starts with the long-term picture for the big three: SPY, QQQ and IWM. All three are holding their breakouts with IWM extending the furthest and QQQ perking up this past week. We continue to see strong participation in the breadth indicators. Yield spreads remain at normal levels with the junk spreads narrowing even more in December. We will then turn to the new ETF ranking table to show how it can be sorted and viewed. Attention then turns to the ETF ChartBook. The Home Construction ETF (ITB) finally broke out, two Healthcare related ETFs are holding their breakouts and tech related ETFs are retaking the lead. The 20+ Yr Treasury Bond ETF (TLT) remains in a downtrend and bond proxies were hit hard on Friday. And finally, we finish with a pair of China-related ETFs and an Israeli tech ETF.  

ETF ChartNotes
Saturday, 19 December 2020

There is a new ETF ranking table that I am testing out. It is web-based and interactive. Users can sort by the columns, narrow the focus, export to a csv file and print. Click here for access.

The Healthcare SPDR (XLV) and Medical Devices ETF (IHI) were hit on Monday and then recovered the last four days. Both finished strong on Thursday-Friday and their breakouts are holding.

The Home Construction ETF (ITB) came to life on Thursday with a big move and broke the upper line of the triangle formation. The bigger trend is up and this triangle is a bullish continuation pattern. RSI bounced off the oversold zone and StochRSI popped with a move above .80.

The China Technology ETF (CQQQ) broke out of a three month consolidation in October and hit a new high. The ETF then consolidated with a triangle/pennant of sorts and is breaking out. RSI did not dip below 50 for an oversold signal, but StochRSI popped three times this month. The China Internet ETF (KWEB) shows similar characteristics.

The Pure Cannabis ETF (YOLO) formed a high and tight pennant, and broke out with a little pop on Wednesday. The long-term trend is up with StochClose bullish (TRUE). The Alternative Harvest ETF (MJ) also have a breakout working from a small wedge. Careful though, these are volatile ETFs with above average risk.

The Israel Tech ETF (IZRL) recorded 52-week highs in October, November and December. This chart provides a great lesson on filtering out the noise. The ETF fell back after the October breakout, but recorded a new high all the same and was clearly in a long-term uptrend. Thus, this was not a failed breakout. Moreover, the pullback in late October provided an opportunity, not a threat. IZRL recently formed a high and tight pennant, and looks poised for a breakout.

High and tight pennants and flags are very tricky patterns when it comes to trading. They usually form after a big advance and represent a short-term rest within the bigger uptrend. Technically, a breakout signals a continuation higher and further gains are expected. Keep in mind, however, that this is a very short-term pattern and price could easily dip below the pattern low with a little volatility. Think through the scenarios and plan your trade before initiating. Personally, I am more of a pullback player (falling wedge, falling flag) and also prefer patterns that cover three to four weeks. High and tight flags in overextended conditions seem to present above average risk.

The 20+ Yr Treasury Bond ETF (TLT) and bond-proxies were hit last week. TLT quietly fell five days in a row last week (-1.43%) to extend its downtrend. The Utilities SPDR (XLU) was flat for the week, but fell .86% on Friday. The Real Estate SPDR (XLRE) was up .50% for the week, but fell 1.73% on Friday. Overall, XLU, XLRE and Residential REIT ETF (REZ) are lagging because they are not even close to recording new highs and are barely positive since June (28 weeks).

The Gold SPDR (GLD) bounced off the rising 40-week SMA the last three weeks and RSI bounced off the 40-50 zone. Note that RSI typically ranges between 40 and 80 during an uptrend with the 40-50 zone acting as momentum support. GLD is challenging channel resistance.

The Silver ETF (SLV) is outdoing gold because it held its September low and held well above the rising 200-day. SLV also broke out and exceeded its mid November high.

Holiday Schedule

Just a heads up on the holiday scheduling. The stock exchanges will close early (1PM ET) on Christmas eve (Thursday) and be closed on Friday, Christmas day. I will publish on Tuesday and Wednesday next week.

The stock exchanges will be closed on Friday, January 1st. I will publish once between Christmas and New Year (on Wednesday December 30th).

Merry Merry!!

Thanks for tuning in and have a great weekend!

-Arthur Hill, CMT
Choose a Strategy, Develop a Plan and Follow a Process

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