Weekend Video, Chart Notes and ChartBook Update
ETF Chart Notes for Saturday, March 14th
* 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 well below its 200-day SMA. As with last week, 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, TLT (and then there were two)
New 52-week Lows (during the week - unadjusted data)
- Major Index ETFs: SPY, RSP, MDY, IJR, IWM, MTUM, USMV
- Sector SPDRs: XLY, XLF, XLI, XLC, XLV, XLP, XLE, XLB, XLU, XLRE
- Equal-Weight Sectors: RCD, EWCO, RYF, RYT, RGI, RYH, RYE, RTM, RHS, RYU, EWRE
- Small-cap Sectors: PSCD, PSCF, PSCT, PSCI, PSCM, PSCE, PSCH, PSCC, PSCU
- Industry Groups: SKYY, HACK, FINX, FDN, IPAY, BOTZ, IGV, ITB, XHB, XRT, KBE, KRE, KIE, REM, IYR, MJ, IBB, XBI, IHI, FCG, XES, XOP, AMLP, GDX, XME, REMX
- Other: VIG, PFF, LQD, HYG, IEMG, EFA
- XES -38.88%,GDX -35.4%,AMLP -30.41%,XOP -26.72%,TAN -26.33%,FCG -25%,REM -24.79%,XLE -24.26%,ITB -22.74%,XME -21.15%
This Week's Leaders and Laggards:
XES -38.88%,GDX -35.4%,AMLP -30.41%,XOP -26.72%,TAN -26.33%,FCG -25%,REM -24.79%,XLE -24.26%,ITB -22.74%,XME -21.15%
UUP +5.46%,AGG -5.09%,XLK -5.31%,HYG -5.88%,XLV -6.68%,XLC -7.29%,QQQ -7.54%,TLT -7.69%,IHF -7.77%,PFF -7.92%
Forget about Relative Strength
There were a slew of 52-week highs a month ago (Valentine’s day) and there is now a bigger slew of 52-week lows. What the heck is a slew, anyway? Ten of the eleven sector SPDRs recorded new lows, all eleven equal-weight sector ETFs recorded new lows and all nine small-cap sector ETFs hit new lows. That is some seriously broad weakness. The market went from a raging bull with a few pockets of weakness a month ago to a raging bear with only two major ETFs avoiding the new low list: QQQ and XLK.
There is no sense twisting this into a positive or something that is less negative. The new low list tells us that the VAST majority of equity-related ETFs are in strong downtrends. They may be oversold and ripe for a bounce, at least they were after Thursday’s close, but they are not in uptrends and this kind of price action is NOT bullish.
Historic Levels of Volatility
The chart below shows the S&P 500 SPDR with the 1-day Rate-of-Change exceeding 4% (up and down) every day last week. Insane in the membrane. Prior to last week, there were three more moves in excess of 4%. All told, seven of the ten trading days in March witnessed moves in excess of 4%. This is truly historic and truly volatile. Thus, we have a bear market and historic volatility. Not my cup of tea.
SPY Hits First Danger Zone
The S&P 500 is really the only stock-related index we need to analyze right now because most stocks and ETFs will likely follow. Remember, correlations rise in bear markets. The chart below shows the S&P 500 SPDR (SPY) hitting its first danger zone after a crazy 9.29% surge on Friday. Forget the talk about bottom picking, indicators at extremes and oversold conditions. We are in a bear market and bear market rules apply. This means SPY is already near a danger zone after a 9.29% surge. The ETF closed in the 275 area on Monday and Wednesday and this area could mark resistance now. Note that this is a guess. Also note that SPY is overbought after a 9.29% gain in one day.
The indicator window shows RSI(10) with a danger zone marked in the 40-50 area. RSI is not in the danger zone yet, but this is also an area to watch in the coming days and weeks. A move into this zone would show RSI as mildly overbought and this could also lead to a pullback.
TLT Hits Potential Reversal Zone
There are only two other charts worth mentioning: TLT and GLD. The first chart shows the 20+ Yr Treasury Bond ETF (TLT) falling hard the last four days and moving into the 50-61.8% retracement zone. TLT was going parabolic in early March and this decline alleviates the overbought extremes. In addition, TLT is still well above its rising 200-day SMA and RSI is in a potential reversal zone (mildly oversold in the 40-50 zone). A bullish setup is in the works.
GLD Becomes Oversold in an Uptrend
The next chart shows the Gold SPDR (GLD) breaking below its February lows with a sharp decline. Note that the Silver ETF (SLV) broke down in early March and the Gold Miners ETF (GDX) hit a 52-week low this week. Clearly, silver and GDX are not immune to broad market weakness. Gold is also not immune, but it is above its rising 200-day SMA and RSI is short-term oversold (<30). This is an mean-reversion setup within a bigger uptrend.
Even though TLT and GLD could be ripe for a bounce, last week’s decline reminds us that they are not immune to whatever is going on out there. We are in a bear market and bad things happen in bear markets. Treasury bonds are the ultimate safe-haven and natural alternative to stocks. Gold less so.