Weekend Video, Chart Notes and ChartBook Update

ETF Chart Notes for Saturday, January 11th

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

New 52-week Highs (unadjusted data)

Major Index ETFs: SPY, RSP, QQQ, MTUM, USMV
Sector SPDRs: XLK, XLY, XLI, XLC, XLV (5 of the 6 biggest sectors)
Equal-Weight Sectors: RGI, RHY, RYT
Small-cap Sectors: PSCI, PSCT
Industry Group ETFs: SKYY, HACK, IPAY, BOTZ, SOXX, IGV, REM, TAN, IHF, IHI
Other: VIG, PFF, HYG, GLD

This Week’s Leaders: SKYY +3.54%, IGV +3.29%, FDN +2.71%, XLC +2.32%, XLK +2.18%, ITB +2.18%, TAN +2.17%, HACK +2.17%, REMX +2.04%, BOTZ +2.01%

This Week’s Laggards: XES -4.72%, XME -4.64%, FCG -3.38%, XOP -3.37%, GDX -2.47%, MJ -1.73%, KRE -1.47%, KBE -1.28%, XLE -0.98%, IJR -0.94%

There were plenty of 52-week highs this week. SPY (large-caps), QQQ (large-cap techs) and RSP (equal-weight S&P 500) hit new highs to lead the major index ETFs. Large-caps led throughout 2019 and they continued to lead here in 2020. Five of the six biggest sector SPDRs hit new highs (XLF did not).  

Technology led the week again with the most new highs (XLK, RYT, PSCT, SKYY, HACK, IGV, SOXX) and the biggest gainers (SKYY, IGV, FDN).  

SPY hit a new high for the week and gained 1.02%, which is not considered an outsized advance for one week. The weekly gain exceeded 2% twice in January 2018 and these were outsized advances. Overall, the low volatility advance continues, but we are seeing a negative divergence in the S&P 500 %Above 20-day EMA (!GT20SPX). Negative divergences in this indicator preceded pullbacks in the past so we should watch closely (explained in video above).

The S&P MidCap 400 SPDR (MDY), S&P SmallCap 600 SPDR (IJR) and Russell 2000 ETF (IWM) edged lower the last three weeks and all three are once again lagging SPY and QQQ. The patterns look like flags or consolidations after the December advance. Breakouts and upside continuations are possible, but only if SPY holds its short-term uptrend and KRE breaks out.  

The Regional Bank ETF (KRE) and Bank SPDR (KBE) fell back to the top of their prior resistance zones, which turn support. Watch 58 for a breakout in KRE and 47 for a breakout in KBE. Finance is the second biggest sector in IWM so a breakout in KRE would be positive for small-caps.

The S&P 500 Momentum ETF (MTUM) and S&P 500 Minimum Volatility ETF (USMV) both recorded 52-week highs this week. Thus, we are seeing strength from both sides of the market.

The Consumer Discretionary SPDR (XLY) broke out in mid December and is consolidating above this breakout. Amazon, which accounts for 24% of the ETF, is holding above its rising 200-day. AMZN reports on February 1st.

The Aerospace & Defense ETF (ITA) broke out of a falling wedge, but did not hit a new high because its biggest component is below its falling 200-day SMA. BA accounts for 21.25% of the ETF. Next week I will replace ITA with the Aerospace & Defense SPDR (XAR) because the latter trades similar volume and is equally weighted. This makes it a better representative of the defense group as a whole.

The Healthcare SPDR (XLV), Biotech ETF (IBB) and Biotech SPDR (XBI) broke out of falling flag patterns this week. The breakouts are holding, but I would be careful with these three because they are still quite extended since early October.

The Real Estate SPDR (XLRE) is breaking out of a falling wedge and the REIT ETF (IYR) is breaking out of a falling channel. The two biggest components in XLRE broke out in late December (AMT and CCI). Here is an article with more details. http://bit.ly/36HCSxy

The Home Construction ETF (ITB) and Homebuilders ETF (XHB)  turned up this week and broke out within their consolidations. RSI also turned up. This is the early signal for a possible bigger breakout and move to new highs.

The Gold Miners ETF (GDX) is at an interesting juncture as it fell back to its breakout zone (28) and firmed on Friday. The breakout zone and late December low mark a support zone (27-28) and this throwback pushed RSI(10) into the 40-50 zone for a mild oversold reading. The Gold SPDR (GLD) hit a new high this week and RSI moved from the low 90s to the low 70s (extreme overbought to normal overbought). SLV is holding its breakout.

The Metals & Mining SPDR (XME) was hit hard and is back near its 200-day and RSI(10) is oversold (below 30).

The Strategic Metals ETF (REMX) is stronger than the Oil & Gas Equipment & Services ETF (XES) because the former broke its September high and 200-day SMA.

The Aggregate Bond ETF (AGG) broke the upper line of a falling wedge and is challenging its November high. The 20+ Yr Treasury Bond ETF (TLT) fell back early in the week, but bounced on Thursday-Friday. Watch 140 for a wedge breakout that would signal money moving into safe-haven bonds. The Corporate Bond ETF (LQD) is holding its November breakout and the High-Yield Bond ETF (HYG) hit a new high this week.

The US Dollar Index ($USD) has gone nowhere for a year. It worked its way higher from January to September and lower from September to January (kind of like TLT). The Dollar’s effect on other assets is greatly exaggerated! This includes small-caps, large-caps, bonds, gold and oil.

Enjoy your weekend!

-Arthur Hill, CMT
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