Report Headlines
- S&P Small and Mid Caps Not Participating
- Home Construction ETF Falls after Breakout
- Regional Bank ETF Hits Make or Break Level
- Finance SPDR Stalls within Rising Channel
S&P Small and Mid Caps Not Participating
The Russell 2000 ETF (IWM) is chugging along with new 52-week highs here in early October, but the S&P SmallCap 600 SPDR (IJR) and S&P MidCap 400 ETF (IJH) stalled the last four weeks and remain well below their November 2024 highs. Even though the weight of the evidence is bullish for stocks, these two groups are not keeping pace. IJR and IJH have yet to reverse their uptrends, but should be watched because trend reversals could have negative consequences for regional banks, housing and retail.
The first chart shows IJH with a rising channel since mid May. The lower line and September lows mark support in the 64-65 area. A break below 64 would reverse the uptrend.
The next chart shows IJR surging in August and consolidating the last five weeks. SPY and QQQ zoomed higher in September, but IJR did not participate. The ETF established support in the 116-118 area throughout September and a break here would be negative.
Home Construction ETF Falls after Breakout
I featured the Home Construction ETF (ITB) last Tuesday as it pulled back and became short-term oversold. A Raff Regression Channel defined this pullback with resistance set at 109. ITB broke out with a surge on Friday and then fell 2% on Monday. The breakout is bullish and this one-day decline could be a shakeout (shaking out the weak hands). The pink line shows the Chandelier Exit (65,5) at 105.52 and a break here would completely negate the setup.
The next chart shows the Homebuilders ETF (XHB) setting up with a pullback and oversold condition (%B at 0). The Raff Regression Channel (blue lines) defines this pullback with resistance at 113. XBH did not break out on Friday and remains in pullback mode, which means the short-term trend is still down. A close above 113 would trigger a breakout.
Regional Bank ETF Hits Make or Break Level
The next chart shows the Regional Bank ETF (KRE) with a rising channel defining the uptrend since late May. The lower line and September lows mark support in the 62-63 area. A break here would reverse this uptrend. Short-term, the ETF surged in August and then corrected in September with a small wedge. I view this as a correction after the August surge. A breakout at 65.30 would signal an end to this correction and argue for a continuation of the rising channel.
Finance SPDR Stalls within Rising Channel
The Finance SPDR (XLF) remains in an uptrend with rising channel support set in the 52.5-53 area. While SPY and QQQ surged to new highs in September, XLF traded flat and did not participate. Stalling within an uptrend is okay, but I am seeing signs of relative weakness as the price-relative breaks its 200-day SMA and hits a multi-month low (middle window). I am watching support at 52.5 closely. A break here would reverse the uptrend and argue for a correction back to the rising 200-day SMA (at best).
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