Today’s video starts with the broad market charts as SPY formed a weekly spinning top and QQQ formed a piercing pattern. Even though the ROC Shock reversal earlier this month remains the dominant chart feature, falling wedges are taking shape and breakouts from these corrective patterns would be short-term bullish. The Nasdaq 100 is holding up the best and its short-term breadth indicators are oversold. In addition, we are also seeing relative strength in several tech-related ETFs. Elsewhere, ITB and XHB are also holding up well. Small-caps, mid-caps, banks and energy are in established downtrends and lagging. Utilities, REITs, bonds and Defense are flat and underperforming. The Fed balance sheet continues its slow expansion and yield spreads do not show signs of stress in the credit markets.
Below are ETF chart notes that are included in the ETF ChartBook PDF.
SPY formed a falling wedge that retraced 50-67% of the June-Sept advance and RSI is in the oversold zone. Time for a bounce? QQQ also has a falling wedge working. Note that falling flags and wedges that extend 2-4 weeks are bullish continuation patterns. The long-term trends are still up and breakouts would reverse the short-term fall.
ETFs that held above their early September low and consolidated the last few weeks are holding up the best. Pennants are short-term bullish continuation patterns and they are forming in BOTZ, ITB and XHB. TAN is close to a new high. The chart below shows ESPO holding the 50-day SMA with a pennant forming.
IBB and XBI broke out, fell back to the breakout zone (throwback) and bounced on Friday to affirm support.
There are a number of ETFs that held up relatively well the last few weeks. After hitting new highs, they fell sharply on September 3rd, 4th and 8th, and then firmed. The broader market continued lower the last three weeks and these ETFs show relative strength. RSI is also firming in the 40-50 zone. ETFs that held up well often lead on oversold bounces. IGV, SOXX, FINX
Sometimes we cannot draw a robust falling flag or wedge. Some ETFs fell sharply in early September and then just drifted lower the last three weeks. They are holding up better than the broader market, but not as well as the ETFs listed above. XLK, SKYY, HACK
There are a number of falling flag/wedge patterns forming in September. After a new high, these patterns represent short-term corrections and upside breakouts would be bullish. RSI is also in the oversold zone (30-50) zone. QQQ, XLY, XLC, XLV, XLP, FDN, IPAY, XRT, IHI
GLD and GDX formed larger falling wedges as both peaked in early August and fell into late September. A strong Dollar gets most of the blame. Nevertheless, GLD is above its rising 200-day and the falling wedge is still deemed a correction within a bigger uptrend.
The 20+ Yr Treasury Bond ETF (TLT) is just plain confused, as are XLU and XLRE.