Weekend Video, Chart Notes and ChartBook Update

ETF Chart Notes for Saturday, January 18th

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

New 52-week Highs (unadjusted data)

Major Index ETFs: SPY, RSP, MDY, IJR, IWM, QQQ, MTUM, USMV

Sector SPDRs: XLK, XLY, XLF, XLI, XLC, XLV, XLP, XLU (includes the big 6)

Equal-Weight Sectors: RCD, RGI, RHS, RYF, RYH, RYT, RYU

Small-cap Sectors: PSCD, PSCH, PSCI, PSCT

Industry Groups: SKYY, HACK, FINX, IPAY, BOTZ, SOXX, IGV

Industry Groups: ITB, XHB, KIE, REM, XAR, TAN, IHF, IHI

Other: VIG, PFF, HYG, IEMG, EFA

This Week’s Leaders: MJ +14.05%, ITB +3.94%, TAN +3.86%, XLU +3.66%, IPAY +3.35%, XHB +3.16%, MTUM +2.99%, FDN +2.98%, XLK +2.94%, FINX +2.8%

This Week’s Laggards: XOP -3.66%, FCG -2.98%, XES -2.41%, XLE -1.15%, SLV -0.41%, XME -0.36%, TLT -0.3%, GLD -0.22%, GDX -0.11%, HYG -0.03%

ETF ChartNotes

36 of the 60 ETFs in the core list recorded new highs this week. This includes all the major index ETFs (large-caps, small-caps, mid-caps and equal-weights), the six biggest sector SPDRs plus XLP and XLU, seven of the equal-weight sector ETFs and four of the small-cap ETFs. Talk about broad strength.

All seven of the tech-related ETFs recorded new highs. Once again, we are seeing broad strength in the Technology sector. Tech is not the only strong sector as three other sectors recorded hat tricks with new highs in the SPDR, the equal-weight sector ETF and small-cap sector ETF (Technology, Consumer Discretionary, Healthcare and Industrials).  

Seems it cannot get much more bullish than this. Nobody knows how far this advance will extend. At this point, I do not see a bear market on the horizon, but the odds of a correction are seriously increasing because SPY is close to the parabolic stage. The weekly PPO(1,40,1) reached 9.74% and this is close enough to the 10% levels reached in January 2018. In addition, the last two weekly candlesticks also show the biggest bodies (open to close range) since the advance began (early October). These excesses are building after an extended advance and this means a corrective period could be on the horizon. As noted on Friday’s report, corrections are like a box of chocolates, you never know what you are going to get. We could see a short flat correction, a deep pullback or a volatile range for several months. We have yet to get the signal that a correction has started though. I will be watching the daily SPY chart for clues: 1-day ROC to move below -1%, ATR(2) to move above 30 and S&P 500 %Above 20-day EMA (!GT20SPX) to move below 50%.

The High-Low Lines for the S&P 500, S&P MidCap 400 and S&P SmallCap 600 are also rising. This group would turn negative if/when two of the three turn down and break their 10-day EMAs.

The Nasdaq 100 ETF (QQQ) and Technology SPDR (XLK) are up some 20% since early October and up over 4% year-to-date.

These ETFs broke out of short consolidations and hit new highs this week: S&P 500 EW ETF (RSP), S&P MidCap 400 SPDR (MDY), Russell 2000 ETF (IWM), S&P SmallCap 600 SPDR (IJR).

The S&P 500 Momentum ETF (MTUM) found its mojo with a 4.4% gain the last eight days and a 52-week high. The S&P 500 Minimum Volatility ETF (USMV) was not far behind with a 52-week high and 3.27% gain.

The Consumer Discretionary SPDR (XLY) is holding above its breakout zone. The Retail SPDR (XRT) is helping with a pennant/wedge breakout.

The Finance SPDR (XLF) cannot get out of its consolidation and remains rangebound since late December. This, however, is a consolidation after a new high and is considered a rest within the bigger uptrend. The Regional Bank ETF (KRE) and Bank SPDR (KBE) formed falling pennants (small wedges) the last four weeks. Both bounced the last two days and are close to breakouts.

The Healthcare SPDR (XLV) and Consumer Staples SPDR (XLP) extended after their flag/pennant breakouts with sharp advances the last 6-8 days.

The Energy SPDR (XLE) formed a rising wedge below its falling 200-day SMA and broke wedge support this week.

The Materials SPDR (XLB) extended its bounce off broken support with a 2.62% gain this week.

The Real Estate SPDR (XLRE) extended on its falling wedge breakout and the Utilities SPDR (XLU) extended on its flag breakout with a 52-week high at 3.66% gain.

The Home Construction ETF (ITB) and Homebuilders ETF (XHB)  broke out of their 10-week consolidations and recorded 52-week highs, the first since late October.

The Alternative Harvest ETF (MJ) is trying to turn the corner with a surge and break above the mid December high. RSI moved above 70 for the first time since March. It is still early days and MJ is simply on the watchlist (aren’t they all).

The Natural Gas ETF (FCG), Oil & Gas Equipment & Services ETF (XES) and Oil & Gas Exploration & Production ETF (XOP) led the way lower the last two weeks. All led the market higher in December, but never cleared their falling 200-day SMAs and never reversed their long-term downtrends.

The Gold Miners ETF (GDX) fell back to its breakout zone (27-28) and broke out of a small falling wedge with a surge on Wednesday. This breakout is largely holding. SLV also broke out of a small falling wedge and this breakout is holding. The chart for GLD is a bit noisier as a clear falling wedge or flag did not form, but the ETF bounced after a pullback the week before.

The Metals & Mining SPDR (XME) tried to bounce off the 50% retracement and 200-day, but failed miserably with a big decline on Friday. Back to the drawing board on this one. Last week’s high now marks the first resistance level to watch for a second attempt.

The Strategic Metals ETF (REMX) broke its September high and 200-day SMA this month and then fell back. The breakout looks like a trend-reversing event, but the ETF needs to settle down and produce a bullish setup before becoming “interesting”.

The Aggregate Bond ETF (AGG) and 20+ Yr Treasury Bond ETF (TLT) broke out on Wednesday and then fell back on Thursday-Friday. I still consider these breakouts bullish and both remain above their rising 200-day SMAs. Bonds represent safe-havens and alternatives to stocks. Thus, we might not see a convincing breakout until stocks move into a correction phase.

Enjoy your weekend!

-Arthur Hill, CMT
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