Art's Charts

Net New Highs Weaken and Volatility Indices Surge

The top pickers are circling the wagons as we roll into September, October, the election, the fiscal cliff, a Euro crisis and a Chinese slow down. Even though this is enough to push one to the sidelines, keep in mind that most of this is probably already priced into the market. In fact, pretty everything we hear or read is already known and priced in to the market. The technical picture continues to favor the bulls, but the correction over the last two weeks has taken its toll. The Nasdaq AD Line stinks, the Nasdaq AD Volume Line formed a bearish divergence and Net New Highs are waning. Despite these negatives, we have yet to see enough selling pressure to change these indicators from bullish to bearish. This indicator summary is not designed to pick tops and bottoms. Instead, it is designed to assess the current state of the stocks market. Despite clear pockets of weakness, the bulk of the evidence still favors the bulls.

Techs Lead Lower as QQQ Gaps Below Triangle Support

Stocks pulled back as traders moved aside ahead of Fed Chairman Bernanke’s speech at Jackson Hole this morning. Truth be told, I think the three economic reports are more important that his speech, which will probably walk a fine line and repeat the last FOMC policy statement. Factory Orders, Michigan Sentiment and Chicago PMI are all on deck this morning. The major index ETFs moved lower on Thursday with modest declines across the board. All nine sectors were down with the Technology SPDR (XLK) leading the way (-1.11%). Weakness in the Networking iShares (IGN) and Market Vectors Semiconductor ETF (SMH) knocked XLK. IGN is poised to test broken resistance in the 25.5-26 area. SMH is testing broken resistance with a flag-like decline the last 2-3 weeks. Note that Intel (INTC) broke descending triangle support with a sharp decline on Thursday.

IWM Starts Outperforming - UUP Firms Near Support

Trading volume is low, the last two dog days of summer are here, we are heading into a three day weekend and Fed Chairman Bernanke is speaking from Jackson Hole at 10AM tomorrow. The first three items argue for another listless session. The fourth item, Chairman Bernanke, is clearly the wild card that could trigger a sizable move. I do not know what he is going to say, but you can be sure he will weigh every word very carefully. Nothing has really changed since the last Fed statement so we can use that as a guideline. The chart below shows the S&P 500 ETF (SPY) moving above 140 in early August and then consolidating. This is the equivalent of the 1400 area for the S&P 500. At what point should chartists become concerned that the uptrend is reversing? Chartist might consider the 139 level in early September (1390 SPX). A move below this level would break consolidation support and the June trend line. The indicator window shows the 23 day rate-of-change, which covers one month. Traders are happy to be long as long as this is positive. A move into negative territory would be, well, negative for the market. 

Charts of Interest: AMCC, AMAT, EMC, FISV, FLEX, MSI

EMC Forms Pennant after Double Bottom Breakout.
FISV Recovers after Island Reversal.
Plus AMCC, AMAT, FLEX, MSI

XRT Holds Channel Breakout - SPY Holds Wedge Breakout

Stocks remained mixed and directionless on Tuesday. The Dow Industrials SPDR (DIA) and S&P 500 ETF (SPY) edged lower, while the Russell 2000 ETF (IWM) and S&P MidCap 400 SPDR (MDY) edged higher. The latter two were up around a 1/2 percent. Three sectors were up and six were down. The Consumer Discretionary SPDR (XLY), Energy SPDR (XLE) and Consumer Staples SPDR (XLP) edged higher, while the rest edged lower. It was a pretty uneventful day that kept existing trends in place. Of note, the Retail SPDR (XRT) moved higher and extended on its falling channel breakout. The advance since the breakout has been choppy, but it is an advance nonetheless. Broken resistance turns into first support in the 59.50 area.

Finance BPI Continues to Climb - SPY Holds Wedge Breakout

Stocks were all mixed up with no place to go on Monday. Techs and small-caps showed some strength as the Nasdaq 100 ETF (QQQ) and Russell 2000 ETF (IWM) edged higher. These miniscule gains were offset by small losses in the S&P 500 ETF (SPY) and the Dow Industrials SPDR (DIA). The sectors were all mixed with five up and four down. The Basic Materials SPDR (XLB) lost the most (-.59%) and the Utilities SPDR (XLU) gained the most (+.22%). As you can see, the gains and losses were unimpressive on both sides. The Finance SPDR (XLF) is perking up a bit as the Finance Bullish% ($BPFINA) moved to its highest level since mid May.

Charts: CERN, CTXS, FFIV, IMN, JDSU, LIFE, UEC, UPS

CTXS Forms Flag at Key Retracement.
UPS Hits Resistance in Retracement Zone.
Plus CERN, FFIV, IMN, JDSU, LIFE, UEC

Shanghai Composite Hit New Low as SPX hits New High

Comments from Fed chairman Bernanke boosted stocks on Friday as the major index ETFs closed with modest gains. Despite Friday’s bounce, the major index ETFs closed lower for the week. This is not surprising because stocks were overbought to start the week and a few indices hit new 52-week highs intraday on Tuesday. The S&P 500, Nasdaq 100 and S&P 100 all hit new highs Tuesday and then backed off Wednesday-Thursday. Even though the bears will suggest that the inability to hold these highs is bearish, I think simply fact that these three indices are trading within spitting distance of 52-week highs is a testament to underlying strength and the overall uptrend.

Nasdaq AD Volume Line Forms Lower High

Stockspulled back this week, but the bigger trends remain up and the bulk of the evidence still favors the bulls. Three days of weakness does not a trend change make, especially when stocks were overbought to start the week. The NYSE AD Line remains in an uptrend, Net New Highs are positive overall and all nine Bullish Percent Indices are above 50%. Despite these positives, there are some concerns. The Nasdaq AD Volume Line formed a lower high and bearish divergence is working. There are fewer Net New Highs than in July. IWM and MDY failed to confirm recent highs in the other major index ETFs. Overall, I still think the bullish indications outweigh the bearish indications.

Stocks Extend Correction as Dollar Becomes Very Oversold

Stocks extended their correction with modest losses in the major index ETFs on Thursday. The Rydex S&P 500 Equal Weight ETF (RSP) led the way lower with a .91% loss. All sectors were down with the Basic Materials SPDR (XLB) and the Energy SPDR (XLE) pacing the losses. Both declined over 1%. Weakness in the Shanghai Composite ($SSEC) continues to weigh on industrial metals, which have not participated in the recent commodity rally. $SSEC moved below 2100 on Friday and continues to show relative weakness.