Weekend Video – Monitoring the Breakouts in SPY, QQQ and Tech-related ETFs, Retail and Housing Perk Up, as Bonds Break Down

Today’s video starts with a revisit to the ROC shock and the rationale behind the call for an extended corrective period, which would be quite normal. We will consider how long this correction might last, the path it might take and what would suggest that this is more than just a correction. The index and sector breadth models remain bullish overall, despite a few individual bearish signals. Utes and REITs led the market higher this week with surges on Friday, but are still largely rangebound. Elsewhere, the many tech-related ETFs are already testing their breakout zones with declines on Friday. Retail joined the breakout parade and the home construction ETF hit a new high. Bonds are breaking down again and gold remains in correction mode.

Below are ETF chart notes that are included in the ETF ChartBook PDF.

Mind the gap in SPY and the 25-Sept close in both SPY and QQQ. A close below the 25-Sept close (prior Friday) would negate the falling wedge breakouts and put the bigger correction theme back in play.

It was another weird day on Wall Street. SPY was down around 1% and the S&P SmallCap 600 SPDR (IJR) was up around 1%. QQQ fell 2.81%, while IWM gained .44% and MDY advanced .88%. Despite one day of strength, small-caps and mid-caps are still laggards overall and largely off my radar. Ditto for banks, energy, insurance and defense.  

Several tech-related ETFs fell sharply on Friday and they are already testing their breakouts. XLK, XLC, IGV, SOXX

XLU and XLRE led on Friday with 1+ percent gains. Both, however, remain below their June and early September highs. Moreover, their June highs were WELL below their February highs. They are still lagging longer term and stuck in trading ranges. Note, however, that all three breadth indicators are bullish for XLU and two of the three are bullish for XLRE.

XRT got into the breakout game with a move above the upper line of a small falling wedge on Thursday. Retailers can smell a stimulus check in the mail.

BOTZ, ITB and XHB are leading with pennant breakouts and new highs this week. TAN left everyone in the dust with a 15% gain this week.

IBB and XBI are still holding their channel breakouts, but both fell and closed weak on Friday. Watch closely. Volatility could be above average in healthcare-related ETFs because of the happenings in Washington DC.

The Healthcare Providers ETF (IHF) surged this week and broke out of a falling channel. This reversal also keeps a bigger rising channel in play since May.

GLD and GDX remain with falling wedge/channel corrections over the last eight weeks. GDX appears weaker than GLD, as does SLV. The Dollar fell back to its breakout zone in the 93.5 area and firmed on Friday. This could be a spot for a bounce in the greenback.

TLT broke pennant support with a sharp decline on Wednesday and this break held. A breakdown in TLT is generally bearish for AGG and LQD.

The High-Yield Bond ETF (HYG) got a bounce, but remains a laggard overall, similar to the S&P 500 EW ETF (RSP). HYG formed lower higher from February to June and again from August to September.

Thanks for tuning in and have a great weekend!

-Arthur Hill, CMT
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