Weekend Video, Chart Notes and ChartBook

Weekend Video, Chart Notes and ChartBook Update

ETF Chart Notes for Saturday, March 7th

* These chart notes are also in the ChartBook PDF file (link above)

There are no stock setups today because the breadth models are decidedly bearish,  volatility is extremely high and the S&P 500 is over 2% below its 200-day SMA. In the meantime, here is a link to an article and paper from Charlie Bilello and Michael Gayed examining the 200-day SMA, risk and leverage.

New 52-week Highs (during the week – unadjusted data)

  • AGG, GLD, LQD and TLT

New 52-week Lows (during the week – unadjusted data)

  • Major Index ETFs: MDY, IWM, IJR
  • Sector SPDRs: XLF, XLI, XLE
  • Equal-Weight Sectors: RCD, RYF, RYE, EWCO
  • Small-cap Sectors: PSCC, PSCD, PSCI, PSCF, PSCI, PSCM
  • Industry Groups: KBE, KRE, FCG, XES, XOP, AMLP, XME
  • Other: HYG

This Week’s Leaders and Laggards:

GDX +12.17%, XLU +7.93%, TLT +7.38%, IHF +6.5%, GLD +6.18%, XLP +6.12%, XLV +4.9%, USMV +4.75%, IYR +4.66%, XLRE +4.65

XES -20.48%, XOP -16.06%, FCG -14.85%, AMLP -9.3%, KRE -7.62%, KBE -6.37%, XLE -6.12%, MJ -5.82%, XLF -3.91%, XME -3.66%

Utilities Lead Defensive ETFs

Defensive ETFs led the rebound the first three days of the week and held up the best on Thursday and Friday. Utilities, bonds, gold, Healthcare, REITs and Consumer Staples finished the week with strong gains.

Banks Lead Lower

Banks and Energy led on the way down. The Bank SPDR (KBE) and Bank SPDR (KBE) fell over 6% for the week, while the Oil & Gas Equipment & Services ETF (XES) and Oil & Gas Exploration & Production ETF (XOP) fell over 15%.

Quantifying Retracement Bounces

Here is scan code to rank the sector SPDRs by the 15-day Fast Stochastic. This value quantifies the retracement of this week’s bounce. For example, SPY declined sharply from February 19th to February 28th and rebounded the last five days. With Friday’s close, the ETF retraced 22.26% of the prior decline and this is reflected in the Fast Stochastic (15,1), which equals 22.26. XLU, in contrast, retraced 61.65% of the prior decline.

[symbol is ‘XLK’] or [symbol is ‘XLY’] or [symbol is ‘XLF’] or
[symbol is ‘XLC’] or [symbol is ‘XLI’] or [symbol is ‘XLV’] or
[symbol is ‘XLP’] or [symbol is ‘XLU’] or [symbol is ‘XLRE’] or
[symbol is ‘XLB’] or [symbol is ‘XLE’] or [symbol is ‘SPY’]

// [group is SP500] // remove forward slashes at front to scan SPX

Rank by Fast Stoch %K(15,1)

Note that the “straight” single quotes on the symbols will turn to “curly” single quotes if you copy this code and paste it into a StockCharts scan. These will need to be changed manually.

Small-cap and Mid-cap ETFs Hit New Lows

Mid-caps and small-caps led the way lower on the charts with 52-week lows in the S&P MidCap 400 SPDR (MDY), Russell 2000 ETF (IWM) and S&P SmallCap 600 SPDR (IJR). Large-caps caught a bad cold and small-caps caught pneumonia. Small-caps and mid-caps have higher betas and typically move more than large-caps, especially on the way down.

New Lows in Key Sectors

The Industrials SPDR (XLI) and Finance SPDR (XLF) hit new lows, which means two of the big six sectors are in strong downtrends. On the equal-weight side, the EW Consumer Discretionary ETF (RCD) and EW Communication Services (EWCO) hit new lows. The retail group is the biggest component of the equal-weight Consumer Discretionary sector and this sector is the most economically sensitive. A new low in RCD is quite negative for the broader market. The chart below shows the S&P 500 EW ETF (RSP) and the six equal-weight offensive sectors with 52-week Price Channels. The green shaded ovals show 52-week highs and the red ovals show 52-week lows.

QQQ and XLK Hold at Key Retracements

The Nasdaq 100 ETF (QQQ) and Technology SPDR (XLK) continue to hold up better than the S&P 500 SPDR (SPY) and Russell 2000 ETF (IWM). QQQ and XLK bounced off the 61.8% retracement zones in early March and are still holding these zones after the sharp decline on Thursday-Friday. Nevertheless, QQQ and XLK are strongly correlated to the S&P 500 and are unlikely to buck the broad market trend.

Software and Semis Battle Retracement Zones

Most of the tech-related ETFs overshot their 61.8% retracements so I removed these retracements from the charts (SKYY, FDN, HACK, FINX, IPAY). In contrast, the Semiconductor ETF (SOXX) and Software ETF (IGV) are still holding near these retracements. SOXX held above last week’s low this week, but IGV dipped below this low. They are both above their rising 200-day SMAs. While I could see biotech bucking the broader market, it is hard to imagine semis and software bucking the broader market.

Healthcare and Biotech Hold Up Well

The Healthcare SPDR (XLV) overshot its 61.8% retracement and rising 200-day on the big decline, but recovered with a sharp move higher Monday to Wednesday and held up quite well on Thursday and Friday.

The Biotech ETF (IBB) held up well with a bounce off the 38.2% retracement in early March and a relatively modest decline on Thursday-Friday. Overall, IBB surged and then consolidated the last two months. Not many ETFs are trading above their 31-January lows right now, but IBB and XBI are.

Bonds and Gold Continue to Lead

Well, I thought TLT was overextended on Thursday when it was up around 14% year-to-date. The ETF added another 8% the last two days and is now up around 23% year-to-date. Wow. This move is going parabolic, but could continue as long as money moves out of riskier assets (stocks, oil ….). Chartists might consider a Chandelier Exit (22,3) as a trailing stop.

The Gold SPDR (GLD) also surged to a new high and is up some 15% since early December. RSI bounced off the 40-50 zone and GLD bounced off the support zone with a big move the last five days.

Dollar Plunges back to early July Lows

The US Dollar Index ($USD) moved from a 52-week high to an 8-month low in 12 days. This looks like a breakdown, but I really have no clue on direction or trend for the Dollar. Moreover, the Dollar does not figure into my analysis process. Personally, I think correlations and narratives involving the Dollar add more noise than value to the analysis process.

Enjoy your weekend!

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

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