Weekend Video – Digesting Gains. Narrowing Spreads, Backtesting Breadth, Bank ETFs Surge, Checking Commodity ETFs

Today’s video starts with a weekly chart of the S&P 500 SPDR to show how stocks are digesting the gains from the prior two weeks. This two week digestion formed small flags on many charts and the leaders are already breaking out. Leadership, however, is changing as techs sag a little. Small-caps, mid-caps, banks and utilities are turning into the new leaders. The performance discrepancy can also be seen when comparing IBB with XBI. We then finish by reviewing the commodity ETFs that were featured in Wednesday’s commentary.

ETF ChartNotes
Saturday, 24 October 2020

SPY remains above its rising 40-week SMA and in a long-term uptrend. After pulling back to the 320-330 area and stalling, the ETF surged for two weeks and then stalled for two weeks. This two week stall looks like a bull flag on the daily chart.

There are bull flags all over the place and these were covered in Friday’s commentary. The S&P MidCap 400 SPDR (MDY) broke out of its flag. The Regional Bank ETF (KRE) broke out of its bull flag and exceeded its August high. The Russell 2000 ETF (IWM) surged the last two days and is breaking out of a bull flag.

The IWM:SPY ratio broke above its 200-day SMA in early October and is challenging its June-August highs. A breakout here would show further relative strength in small-caps.

The S&P 500 EW ETF (RSP) and S&P SmallCap 600 SPDR (IJR) have bullish Ascending Triangle patterns working.

The Software ETF (IGV) tagged its early September high after the 28-Sept breakout and edged lower the last two weeks. The ETF is holding above the ATR Trailing Stop with a short consolidation, which could also be considered as a bull flag.

The Biotech SPDR (XBI) held up better than the Biotech ETF (IBB) this week and did not trigger its ATR Trailing Stop.

The Healthcare Providers ETF (IHF) hit a new high Friday and the Medical Devices ETF (IHI) held up well the last two weeks.

The DB Agriculture ETF (DBA) is also showing strength as it broke out of a small consolidation and challenged the September-October highs.

Thanks for tuning in and have a great weekend!

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

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