The next report will be on Wednesday, 30th
Stocks are all over the place in April with a breakdown at the beginning and a Zweig Breadth Thrust towards the end. April price action seems to dominate, but it was the March breakdowns that reversed the long-term uptrends. The weight of the evidence also turned bearish [1] in mid March as long-term breadth indicators also triggered. Currently, the long-term downtrend signals remain and the long-term breadth indicators are still on bearish signals. SPY and QQQ need to break their late March highs and clear their 200-day SMAs to revive their long-term uptrends.
Report Headlines
- Zweig Breadth Thrust and Keltner Update
- Resistance-Reversal Zones Coming into Play (SPY, QQQ)
- Tech, Industrials and Semis Hit Resistance (XLK, XLI, SMH)
- ETF with Breakouts and Relative Strength (ITA, CIBR, ARKF, IHI)
- Rising Wedges Back to Prior Support Zones (IYZ, XLF, XLC)
- Price and RSI Breakouts for IBIT
- DB Agriculture ETF Breaks Wedge Line
- Natural Gas ETFs Reverses at 200-day SMA
ZBT Keltner Update
What about the Zweig Breadth Thrust [2]? This signal triggered last Thursday and remains in play. I am wary because the news (tariff chaos) drove the setup as the S&P 1500 ZBT indicator plunged below -20% from April 7th to 10th. News also triggered the buying binge that pushed the indicator above +23% last week. Two pieces of news triggered last week’s surge. The administration blinked with a softer stance on China and the Fed blinked with the possibility of a June rate cut. I wonder if China is going to play nice.
News driven or not, the Zweig Breadth Thrust signal triggered and has yet to be proven otherwise. As detailed in Saturday’s report, this signal would negate should SPY close below the lower Keltner line for five consecutive days. As noted on the following charts, a close below 527 would fill last Wednesday’s gap and reverse the rise in the rising wedge. This would also be negative. A powerful thrust and follow through should hold. We should see minimal downside after such moves.
Resistance-Reversal Zones Coming into Play (SPY, QQQ)
SPY fell 21.5% with the decline from the February high to the early April low and then advanced 14.5% with the move from the early April low to Monday’s high. Even with Monday’s close near 551, SPY is still down around 10% from its February high. More importantly, the early March breakdown remains in play because it has yet to be negated. The late March high, 200-day SMA and a buffer mark a resistance zone in the 570-580 area. A breakout at 580 would recapture the 200-day, negate the March breakdown and call for a new uptrend.
Assuming the long-term trend is still down and the long-term breadth indicators are still bearish, SPY is currently in a precarious position. Namely, SPY is trading near its first Bearish Setup Zone. This is a zone marked with a prior support break and the 50% retracement (pink shading). In fact, I consider the entire zone between 550 and 580 as a danger zone that could give way to a short-term reversal.
Patterns are challenging with big swings and above average volatility. There is perhaps a rising wedge taking shape this month. This pattern is also typical for bear market bounces. I am watching last Wednesday’s gap above 530. This is essentially the follow through day/week that produced the Zweig Breadth Thrust. A strong follow through and breadth thrust should hold, without looking back. A close below 527 would fill the gap and negate the Wednesday-Thursday surge. This would be negative.
The bottom window shows RSI(14) dipping below 30 in March and April. Normally, RSI(14) does not become oversold in an uptrend. Notice that RSI held 30 in April and August 2024. If we assume a momentum downtrend in RSI, then the 50-60 zone marks momentum resistance. RSI crossed above 50 and is also trading in a resistance reversal zone.
The next chart shows 78min bars for more granularity.
The next chart shows QQQ with similar characteristics. Broken support and the 50% retracement mark first resistance in the 470 area. The late March high, 200-day SMA, 61.8% retracement and a buffer mark key resistance in the 490-500 area. A rising wedge is taking shape with gap-support marked at 445 and RSI is in the 50-60 zone. A close below 444 would negate the follow through on Wednesday-Thursday, and reverse the April upswing.
Tech, Industrials and Semis Hit Resistance
The next charts show the Industrials SPDR (XLI), Technology SPDR (XLK) and Semiconductor ETF (SMH) nearing Bearish Setup Zones (pink shading).
ETFs with Breakouts and Relative Strength
Broadly speaking, there were two breakdowns over the last two months. The first occurred in early March when SPY, QQQ, XLK and others broke supports and their 200-day SMAs. After a rebound into late March, the second breakdowns occurred in early April when stocks plunged after liberation day. This is when CIBR, IHI, AMLP, ITA, IYZ and others broke down. They were holding up in March, but succumbed to broad market selling pressure in early April. Many of the ETFs that broke down in April recaptured these breakdown levels and also moved back above their rising 200-day SMAs. These are the true leaders in the market right now.
The Aerospace & Defense ETF (ITA) is one of the strongest equity ETFs in the market. Why? First, ITA hit a new high in late March, which is when many ETF were recovering after their early March breakdowns. Second, ITA quickly recovered after the early April breakdown and is less than 3% from its 52-wk high. Ignoring the early April breakdown/recovery, the price chart shows a consolidation since November as the ETF traded between 142.5 and 160. ITA is back above the rising 200-day SMA with last week’s surge. I am leaving support at 142.5 and will remain bullish as long as this level holds. The bottom window shows the ITA/RSP ratio hitting a new high this week (relative strength).
The Cybersecurity ETF (CIBR) is showing upside leadership with a breakout and move above the 200-day SMA. CIBR broke down with the rest of the market in early April, but move back above this break zone with a follow-through surge last week. CIBR hit resistance at 64 in early-mid April (pink line) and broke out last week. This puts the ETF back above its rising 200-day SMA. Wednesday’s gap marks first support in the 61-63 area. The middle window shows the CIBR/RSP ratio turning up in April as CIBR outperforms.
The next chart shows the ARK Fintech Innovation ETF (ARKF) with a deep decline into early April, a surge to 33 in early-mid April and a breakout at 33 last week. This puts ARKF back above the rising 200-day SMA. The breakout zone in the 32-34 area turns first support (blue shading). A strong breakout-surge should hold. A close below 31.90 would erase last week’s surge and negate the breakout. The middle window shows the ARKF/RSP ratio turning up in April as ARKF shows relative strength.
The next chart shows the Medical Devices ETF (IHI) with a breakdown in early April and a full recovery the last three weeks. IHI formed a steep falling channel in March-April, established short-term resistance at 58 in mid April and broke out with last week’s surge. Wednesday’s gap and the breakout zone mark first support in the 57-58 area. A close below 56.9 would negate the breakout. The middle window shows the IHI/RSP ratio moving higher in April as IHI shows relative strength this month.
Rising Wedges Back to Prior Support Zones
The next chart shows the Telecom ETF (IYZ) surging above its mid April high to negate the early April breakdown. IYZ broke the support zone with a gap down in early April and is in the process of filling this gap with a sharp gain the last five days. There is still a resistance zone in play from broken supports and the 50% retracement. However, the bulls have the benefit of the doubt as long as the wedge rises. I am marking support at 25 and a close below this level would reverse the rise.
The next chart shows the Finance SPDR (XLF) with similar characteristics. XLF broke support in the 47 area, and recaptured this break with a surge into late April. A rising wedge is taking shape with support marked at 45.50.
The next chart shows the Communication Services SPDR (XLC) with a rising wedge that recaptured the 200-day SMA. However, broken support turns into resistance and this wedge retraced 50% of the prior decline. As such, the pink shading marks a Bearish Setup Zone, which is an area of resistance that could give way to a reversal. Rising wedge support is set at 90. A break here would reverse the rise and signal a continuation of the prior decline.
Price and RSI Breakouts for IBIT
The Bitcoin ETF (IBIT) was on the radar in mid April as the falling wedge hit the key retracement zone, price started firming and RSI formed a bullish failure swing. IBIT reversed with a break above the upper wedge line on April 14th, an RSI breakout on April 21st and a break above the mid March high (April 22nd). The breakout zone in the 47-50 area turns support. A strong breakout and last week’s surge should hold. A closed below 47 would negate these breakouts and call for a re-evaluation
DB Agriculture ETF Breaks Wedge Line
The next chart shows the DB Agriculture ETF (DBA) with a classic falling wedge correction and breakout last week. This falling wedge returned to the rising 200-day SMA as DBA retraced around 61.8% of the prior advance. There is also support here from the prior resistance breaks (blue shading). DBA reversed this fall with a breakout at 27 (pink line). I am setting a re-evaluation level at 26.
Natural Gas ETFs Reverses at 200-day SMA
The next chart shows the EXTREMELY volatile and risky Natural Gas ETF (UNG) with a 98% surge into early March and a 38% fall into late April. UNG broke Double Bottom resistance in late December and early January. This breakout zone typically turns into support (blue shading), but UNG is volatile and prone to overshoots. The ETF broke its 200-day SMA last week and recovered this week with a 5.86% surge. This strong bounce is the first sign that support is at hand and UNG may be bottoming. A close below 15.5 would call for a re-evaluation. The bottom window shows %B becoming oversold with a dip below 0 in early April. This oversold condition, however, lingered as UNG continued lower into April. There are signs of an upturn here as well as %B broke the early April high (pink line). Be careful with this one.
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