StockCharts Blogs - ChartWatchers

SPY CHALLENGES 2011 RESISTANCE WITH BIG WEEK

With a string of positive economic reports lifting stocks this week, the S&P 500 ETF (SPY) closed higher for the fifth consecutive week. Friday was a big reporting day with Factory Orders showing strength, IWM Services indicating expansion and the employment rate coming down. These positive reports should not come as a surprise because stocks, which are a leading indicator, are up sharply since early October. The chart below shows SPY challenging its 2011 highs around 135, a level that marked resistance from April to July. SPY failed at this level last summer and declined rather sharply in late July and early August. Flash forward to 2012 and SPY is once again at resistance and overbought after a sharp advance the last four months. The ETF is up over 25% from its early October low and up over 15% from its late November low. At the risk of over speculating, resistance and these overbought conditions could give way to a corrective period in the coming weeks. Should a sideways consolidation develop between 125 and 135, an inverse head-and-shoulders patterns evolve. Notice that the June lows marks potential support for the right shoulder around 125.


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Treasury Yields Surge ahead of Fed Meeting

The FOMC meets next Tuesday-Wednesday and will make its policy statement Wednesday afternoon. With stocks surging and recent economic reports buoyant, the bond market may be looking ahead to this meeting with trepidation.  The first chart shows the 10-year Treasury Yield ($TNX) rising sharply the last three day. Treasury bonds rise when treasury yields falls.  Overall, the chart shows $TNX forming a trough at 1.7% (17) in late September and surging in October, which is when the stock market surged. Note that long-term treasury yields and the stock market were positively correlated most of the last 12 months. This means they moved in the same direction most of the time. Turning back to the price chart. The 10-year Treasury Yield ($TNX) declined with a falling wedge in November-December and held above its October low. $TNX found support just above 1.8% the last few weeks and surged back above 2% this week. Despite this surge, $TNX remains just short of a breakout. Further strength above the early January high would produce a breakout to signal a continuation of the October surge. This would target a move towards the next resistance zone around 2.3-2.4%. This would be bullish for stocks - provided the positive correlation between stocks and treasury yields continues. Note that treasury yields and treasury bonds move in opposite directions. Therefore, an upside breakout in the 10-year Treasury Yield would be bearish for the 20+ Year T-Bond ETF (TLT).



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Good trading,

Arthur Hill CMT

QQQ Starts the Year Showing Relative Strength

The Nasdaq 100 ETF (QQQ) is showing relative strength this year with a triangle breakout and surge above its early December high. On the daily candlestick chart below, QQQ surged in October and then consolidated in November-December. This consolidation started wide in November and then narrowed in December as a lower high and higher low formed. This year’s triangle breakout signals a continuation of the October surge with the 2011 highs in the 59-59.5 area marking the next resistance zone. The gap and the lower trendline of the triangle mark support in the 55-55.5 area.

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The indicator window displays the price relative (QQQ:SPY ratio), which shows the performance of QQQ relative to the S&P 500 ETF (SPY). QQQ outperforms when this ratio rises and underperforms when this ratio falls. Notice how QQQ underperformed from mid October to late December. The ratio turned up at the end of December and broke the trendline extending down from the October high.  This upturn shows the QQQ is outperforming SPY in 2012 - all four trading days of it!

Happy New Year and Good Trading, 

Arthur Hill CMT  

RETAIL SPDR COULD HOLD THE KEY IN 2012

The Retail SPDR (XRT) remains one of the strongest ETFs in the market. As a core part of the consumer discretionary sector, retail is one of the most important industry groups and Christmas is perhaps the most important season. A lot is riding on the consumer this holiday season. The chart below shows XRT bouncing off support in the 42.5 area and working its way back above 50. A rising channel has taken shape with support marked at 47.50. The bulls are in good shape as long as prices hold this rising channel. A move below 47.5 would break channel support and argue for a continuation of the summer decline. This would be a bearish development for retailers, the consumer spending outlook and the broader market. 


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The indicator window shows 14-period RSI. Notice that RSI broke above 60 in April 2009 to turn momentum bullish. Once bullish, RSI oscillated between 40 and 80 during the bull run. Andrew Cardwell, a noted RSI expert, notes that RSI oscillates in bull zones and bear zones. A bull zone extends from 40 to 80, while a bear zone extends from 20 to 60. Notice that RSI moved below 40 with the summer breakdown and is now hitting resistance in the 50-60 zone. This puts RSI in a bear zone and sets up a big test for momentum. A break above 60 would turn momentum bullish again, while a break back below 45 would be bearish.

Good trading   -- Arthur Hill CMT

QQQ Forms Island Reversal with Big Move

While gaps are not what they used to be, there were a few island reversals on the charts this week. The chart below shows the Nasdaq 100 ETF (QQQ) with a large island reversal over the last three weeks. A bullish island reversal forms with a gap down, a consolidation and then a gap up. The two gaps match, which makes the price data in between appear detached – like an island. Traders establishing short positions between the gaps are trapped on the island with losses.


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The chart above shows QQQ with a bullish island reversal. The ETF gapped down on November 21st, consolidated and then gapped up on November 30th. Actually, there was even a reversal within the consolidation. QQQ formed an inverted hammer on Friday and then gapped up on Monday. Follow through with Wednesday’s big gap completed the island reversal. In general, a gap up is considered bullish as long as it holds. The gap zone turns into the first support zone to watch. A bullish gap should hold. Failure to hold this gap would be bearish.

Good trading!

Arthur Hill CMT

Russell 2000 ETF Hits Big Resistance

A number of bearish developments have emerged on the weekly chart for the Russell 2000 ETF (IWM). This weekly chart extends two and a half years to cover the long-term situation. First, the ETF broke support with a sharp decline in August and then exceeded the July 2009 trendline. Second, the subsequent bounce met resistance near broken support and the 61.80% retracement. This is what would be expected from a counter trend advance within a bigger downtrend. Third, RSI broke below 40 for the first time since the rally began 2009. The 50-60 zone now becomes resistance.

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Despite potentially bearish developments on long-term chart, IWM remains in an uptrend on the daily chart, which captures the medium-term trend. The next chart shows IWM breaking above its resistance zone with the late October surge. The ETF became quite overbought with this surge and then consolidated the last four weeks. The break from this consolidation holds the next key. An upside breakout would signal a continuation of the October advance and target a move to the summer highs. Conversely, a break below consolidation support would have medium and long term implications. First, resistance on the weekly chart would be reinforced. Second, a reversal of the October-November advance would signal a continuation of the long-term downtrend. This would target a move below the October low.

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Good trading,

Arthur Hill CMT

WATCHING THE RESISTANCE BREAKOUTS IN XLK AND XLY

Earlier this week I noted that the Nasdaq 100 ETF, the Russell 2000 ETF and the S&P 500 ETF were testing broken resistance. The October surges produced breakouts and it is important that these resistance breakouts hold. Basic technical analysis teaches us that broken resistance levels turn into support. Failure to hold these breakouts would be a sign of weakness. Looking at the key offensive sectors, I see similar support levels from broken resistance. These levels are holding so far and these SPDRs have established similar support zones with the lows of the last few weeks. The offensive sectors include consumer discretionary, technology, finance and industrials. In particular, I am focusing on the consumer discretionary and technology sectors. The first chart shows the Consumer Discretionary SPDR (XLY) breaking a resistance zone around 38 and this zone turning into a support zone. A break below 37.5 would reverse the October upswing and question the validity of the October breakout. The indicator window shows the Price Relative trending higher. Notice that this indicator is testing trendline support. A break would indicate that the consumer discretionary sector was moving from leader to laggard. The second chart shows the Technology SPDR (XLK) with similar characteristics.




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Good trading,
Arthur Hill CMT

US DOLLAR INDEX TEST BREAKOUT WITH THROWBACK

The US Dollar Index ($USD) was hit hard this week with a 2.2% decline. Weakness in the Dollar buoyed oil and stocks, which have been negatively correlated with the greenback. Dollar weakness and Euro strength is also associated with the risk-on trade. Despite this week’s decline, the bigger trend is still up and support is close at hand. The first chart shows weekly prices with a Double Bottom breakout in September $USD broke resistance with a strong surge that was confirmed by RSI, which broke to its highest level in a year.
 

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The second chart shows more details with a daily candlestick chart. There are three reasons to expect support soon. First, broken resistance in the 76 area turns into support. A “throwback” to broken resistance is not uncommon after a breakout. Second, a move to the 76 area would retrace 61.80% of the prior advance. Third, RSI moved into the 40-50 zone. This area acts as support during and uptrend.

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TECHNOLOGY SPDR FAILS AT KEY RETRACEMENT

After hitting resistance at a key retracement this month, the Technology ETF (XLK) fell with what looks like a continuation of the bigger downtrend. First, notice that the ETF formed a massive Triple Top that extends from January to July. XLK became oversold with the July-August breakdown and then retraced 61.80% with the bounce back to the 25.25 area. Even though XLK moved back above broken support, a 61.80% retracement is normal for a counter trend bounce.

This advance looks like a Rising Channel on the daily chart and a Rising Flag on the weekly chart. These are also typical for counter trend advances. Regardless of the pattern interpretation, a move below the lower trendline and the late September low would signal a continuation of the July-August decline. This would target further weakness towards the 21 area. Using a Flag or Measured Move technique, the length of the prior decline (26.75 – 22.50 = 4.25) is subtracted from the September high for a target (25.25 – 4.25 = 21).


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The technology sector showed relative strength in September and was the market leader. The indicator window shows the Price Relative moving higher since late June. The Price Relative is the XLK:SPY ratio. This ratio rises when XLK outperforms SPY and falls when XLK underperforms SPY. Even though the Price Relative remains at high levels, a breakdown in this leading sector would be quite negative for the broader market.

UTILITIES ARE STRONGEST SECTOR OVER LAST 50 DAYS

The S&P 500 peaked in early July and declined sharply into early August. There has been a rebound from this low, but all sectors are still down since July 8th – except one. The Utilities SPDR (XLU) is the only sector SPDR showing a gain since July 8th. The first PertChart shows absolute performance for the nine sectors and the S&P 500 over the last 50 days. The S&P 500 is down 8.51% and the rest of the sectors are down from 2.84% (Consumer Staples) to 16.53% (Finance). The Utilities SPDR (XLU), which is the highest yielding SPDR, is up .65% since July 8th. It ain’t much, but it is better than a loss.




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The second PerfChart shows the performance for these sectors relative to the S&P 500. Click the S&P 500 tab to move between absolute and relative performance. Sectors that are down less than the S&P 500 or up show positive relative performance. Sectors down more than the S&P 500 shows negative relative performance. Finance and industrials are leading the way lower and showing relative weakness. The consumer staples and utilities are holding up the best and showing relative strength. This shows a defensive oriented market that prefers safety and yield over return.

Take care,
- Arthur 

EURO TRUST FORGES OUTSIDE REVERSAL WEEK

The Euro Currency Trust (FXE) opened strong on Monday, but moved lower throughout the week and closed near its low for forge an outside reversal. An outside reversal occurs when the high is above the prior high and the low is below the prior low. A close below the prior open reinforces the reversal. While the overall trend remains up, chartists should watch support from the May-July lows for a potential trend reversal. The chart below shows FXE forming a big outside reversal in early May and then stalling the next 3-4 months. The May-July lows mark support at 139. A move below these levels would forge lower lows and break the June 2010 trendline. This would clearly reverse the uptrend.


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The indicator window shows StochRSI with horizontal lines set at .40 and .60. Instead of using crosses above the midpoint (.50) to generate signals, I applied at .10 buffer to bullish and bearish signals. A move above .60 is momentum bullish until there is a counter move below .40. A move below .40 is momentum bearish until there is a counter move above .60. Notice how StochRSI moved below .40 in early May and has yet to produce a counter signal. This indicator is in bear mode until a break above .60. You can read more about StochRSI in our ChartSchool.

Consumer Discretionary Sector Moves from Leader to Laggard

Selling pressure since July 1st pushed the Consumer Discretionary SPDR (XLY) from a market leader to a market laggard. These Sector PerfCharts show the performance for the nine sector SPDRs relative to the S&P 500. The percentage change shown is the relative change, which equals the percent change in SPY less the percent change in the sector SPDR. If XLY is down 16.99% and SPY is down 16.13%, relative performance for XLY would be -.86% (-16.99 less -16.13 = -.86). Sectors with positive bars are outperforming SPY, while sectors with negative bars are underperforming. The first Perfchart extends from May 13th to July 1st. Notice that the Consumer Discretionary SPDR, Industrials SPDR and Basic Materials SPDR are outperforming the broader market (SPY). Also note that the Consumer Staples SPDR is underperforming, while the Healthcare SPDR and Utilities SPDR are slightly outperforming. 

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Flash forward to the most recent 35 day period and there is a drastic change in the relative performance PerfChart. First, notice that the Consumer Discretionary SPDR moved from relative strength to relative weakness. The Industrials SPDR, Basic Materials SPDR and Energy SPDR also moved from positions of relative strength to relative weakness. Second, notice that the three defensive sectors now show relative strength. All sectors are down over the last 35 days, but utilities, consumer staples and healthcare are down less than the market. This shows a clear preference for defense, which is bearish for the broader market. The Technology ETF is a bit of an anomaly as it moved from relative weakness to relative strength. This indicates that the sector may lead if and when the market does bounce.

A Dow Theory Non-Confirmation and Sell Signal

Based on the writings of Charles Dow, Dow Theory utilizes the Dow Industrials and Dow Transports to generate buy and sell signals for the broader market. The market trend is up when both forge higher highs. The market trend is down when both forge lower lows. A non-confirmation is present when only one forges a higher high or lower low.

The first chart shows the Dow Industrials within a clear uptrend from late August to early May. This uptrend started to falter when the Average failed to exceed its prior high and formed a lower high in July. A clear trend reversal occurred this week as the Average broke below its June low.





The other chart shows the Dow Transports with an uptrend from August until early July. Notice the difference? The Dow Transports exceeded its May high to forge a higher high in July. The Dow Industrials failed to confirm this new high in the Dow Transports. This non-confirmation was a warning sign, but not a sell signal. The Dow Theory sell signal did not materialize until both Averages broke below their June lows. How long will this sell signal remain in effect? Until there is a Dow Theory buy signal with higher highs in both Averages. There is no timeframe for these signals. They are simply in force until proven otherwise.

XLF Finds Support in Middle of a Big Consolidation

The Finance SPDR (XLF) has been on a road to nowhere for almost two years now. After first moving above 15 in September 2009, the ETF embarked on a long trading range with support near 13 and resistance near 17. XLF has crossed the mid point (15) at least 10 times since September 2009. Even though the ETF closed below 15 at the beginning of June, a pair of indecisive candlesticks formed the next two weeks and the ETF bounced off support in late June. Support stems from broken resistance (yellow highlight).

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This could be a big moment for the beleaguered sector. XLF has been underperforming the S&P 500 since August 2009. The indicator window shows the Price Relative (XLF:SPY ratio) zigzagging lower with a new low recently. Relative weakness is not a good sign. Turning back to the chart, the ETF established short-term support at 14.50 over the last four weeks. This is the level that must hold. A break below 14.5 would open the door to support in the 13-13.50 area. On the upside, the February trendline and late May high mark an important resistance hurdle. A breakout here would be quite positive and open the door to an assault on the 2010-2011 highs.

Energy SPDR Breaks Neckline Support

The Energy SPDR (XLE) has been one of the weakest sectors this month. In fact, the chart shows XLE breaking support from a large Head-and-Shoulders reversal pattern. The left shoulder peaked in March, the head peaked in April and the left shoulder peaked at the end of May.  With a 7% decline the last 13 days, the ETF broke below the lows extending back to February. This confirms the pattern and targets a move to around 65. The height of the pattern (81 – 73 = 8) is subtracted from the support break (73 – 8 = 65) for a target.


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At this point, traders need to be careful that the right half of the Head-and-Shoulders pattern does not evolve into a mere falling wedge. Currently, the wedge is clearly falling with no signs of strength. A move above the wedge trendline and resistance at 76 would reverse this fall and put the bulls back in control.

RETAILERS BEAR BRUNT OF SELLING PRESSURE

With economic indicators and employment statistics coming up short this week, retail stocks came under considerable selling pressure. Led by weakness in Wal-Mart and Home Depot, the **Retail HOLDRS (RTH)** is down some 7% the last few weeks. Chart 7 shows RTH breaking the trendline extending up from early September. RTH is clearly in a short-term downtrend with the next big support zone in the 102-104 area. As far as the long-term trend is concerned, note that a major topping pattern has yet to take shape. We have yet to see a Double Top, Head-and-Shoulders or some other distribution pattern unfold. Moreover, we have yet to see a major support break. This means it is still too early to label the big trend down on this chart.

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The second chart shows the Retail SPDR (XRT) taking a hit over the last three days. The ETF is poised to test support just above 50. This support level stems from the November trendline and broken resistance. The Price Relative (XRT:SPY ratio) has yet to break down either. The ratio flattened the last two months with the early May low marking support. A break below this level would indicate relative weakness in XRT.


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Gold Miners ETF Bounces off Major Support Level

After getting slammed with a 10+ percent decline in May, the Gold Miners ETF (GDX) hit support and bounced over the last few days. As the chart below shows, this is no ordinary support level for GDX. Support in the 53 area stems from broken resistance and at least two reaction lows (October-January). There is also a reaction low around 55 in mid March. The ETF is finding some buying interest at support with a bounce the last few days. The black box highlights the last seven daily candlesticks. The first two are **spinning tops**, which affirm support. There was a mini-breakout with the move above the spinning top highs. Failure to hold last week’s low would be put the big support zone in jeopardy again. The second chart shows the **Junior Gold Miners ETF (GDXJ)** testing support from reaction lows extending back to mid November.




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OIH Breaks Support as it Leads XLE Lower

The Oil Service HOLDRS (OIH) is leading the energy sector lower with a break below the March lows. There are two bearish patterns working on the OIH price chart. First, OIH hit resistance in the 162.5-167.5 area with three reaction highs and then broke below support with a sharp decline this week. Even though a picture perfect triple top or head-and-shoulders pattern did not emerge, the essence of a distribution and breakdown is clearly there. Second, the ETF broke the third of three fan lines with this week’s decline. These successive breaks affirm an increase in selling pressure leading to the breakdown.


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The indicator window shows the OIH:XLE ratio plot. OIH outperforms when this ratio rises and underperforms when this ratio falls. Also known as the Price Relative, this ratio peaked in late February and moved to multi-month lows this week. All told, the medium-term outlook for the Oil Service HOLDRS has turned bearish with this week’s technical signals. The late April highs mark the first resistance area to watch for a reassessment. For reference, the second chart shows the Energy SPDR (XLE) breaking double top support this week, but still above the February-April lows.


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INFLATION-INDEXED BONDS AND GOLD SURGE

The positive relationship between the Inflation Indexed Bond ETF (TIP) and the Gold SPDR (GLD) went through a rough patch in December-January, but got back on track the last two month. First, note that both remain in clear uptrends. The chart below shows TIP (red) and GLD (black) surging to new 52-week highs in October-November. Both then underwent corrections the next few months. GLD traced out a flat correction and bottomed in late January. TIP underwent a deep correction with a dip below its December low in mid February. Both resumed their positive relationship with a surge over the last two months. GLD hit a new all time high. TIP is close to breaking above its October-November highs.

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Strength in both suggests the presence of inflationary pressures in the market. GLD is viewed as a hedge against inflation. Even though bonds in general are not amenable to inflation, TIP provides a bond alternative that is hedged against inflation. The indicator window shows TIP (red) along with the 20+ year Bond ETF (TLT). Both put in lows in mid February, but TIP is already challenging its high and TLT remains well below its high. The inflation-indexed TIP is clearly outperforming non-hedged TLT.

DOW TRANSPORTS SURGE TO NEW TO NEW 52-WEEK HIGH

Despite relative weakness in airlines and $108 oil, the Dow Transports surged to a fresh 52-week high on Friday. The chart below shows the Average finding support around 4900 from late February to mid March and then surging around 10% the last 2-3 weeks. Admittedly, there is an outside chance that a broadening formation is taking shape, but the Average shows no signs of significant selling pressure at the moment.


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In the first indicator window, we see the Dow Transports relative to the Dow Industrials. This indicator is the Price Relative, which is a ratio chart of the two Averages ($TRAN:$INDU). The Price Relative rises when the Transports outperform and falls when the Transports underperform. The ratio is currently rising as the Transports outperform. The second indicator window shows three key groups within the Dow Transports: Truckers (blue), Railroads (green) and Airlines (pink). Coal-laden Railroads are leading the way with a 52-week high this week. Truckers are challenging their 2011 high. Airlines are the current laggards.

QQQQ and IWM Form Pennants at Potential Support Levels

With big declines on Wednesday, the Nasdaq 100 ETF (QQQQ) and the Russell 2000 ETF (IWM) both became oversold and hit potential support zones. The first chart shows QQQQ hitting support around 54 after an 8+ percent decline the last few weeks. This decline pushed the Commodity Channel Index (CCI) below -200 for the first time since early May, seen of the infamous flash-crash. Broken resistance, the December consolidation and the 62% retracement combine to mark support here. The ETF consolidated the last three days with a small pennant taking shape. A break, up or down, from this consolidation will provide the next short-term directional clue.


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The next chart shows IWM hitting support just above 77. This support zone stems from the January lows and the 50% retracement mark. Notice that IWM held up much better than QQQQ over the last few weeks. CCI moved well below -100, but did not exceed its January momentum low and did not exceed -200. A small pennant also formed the last three days. A move above 80 would put the bulls back in play, but a break below 78 would argue for a continuation lower with the next support target around 74.


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Overall Uptrend Remains As SPY Battles a Pair of Gaps

The S&P 500 ETF (SPY) is hitting resistance from last week’s gap down, but may just find support from this week’s gap up. The latest round of gaps started with a gap down from a new high on 22-February. The ETF rebounded later that week, but fell sharply on Monday with a long black candlestick. This candlestick met resistance from the 22-February gap. SPY firmed above its late February low and gapped up on Thursday. However, once again, the ETF met resistance from the 22-Febuary gap with a decline on Friday. This puts the ETF between a rock (gap down) and a hard place (gap up). The first one to be filled will offer a good clue on the next directional move.


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Overall, the trend on the daily chart remains up. SPY is holding the support zone around 130 and RSI is holding support in the 40-50 zone. This zone held in November and late January. A move below 40 in RSI and 129.5 in SPY could signal the start of a correction that retraces a portion of the September-February advance.

AGRICULTURAL COMMODITIES LEAD BROAD COMMODITY RALLY

Except for natural gas, most major commodities and commodity groups are up sharply over the last 6-8 months. Stockcharts.com provides a broad range of Dow Jones-UBS commodity related indices. The PerfChart below shows seven commodity related indices and the 20+ year Bond ETF (TLT). Five represent major commodity groups. The DJ-UBS Commodity Index ($DJAIGT) represents commodities as a whole and the DJ-UBS Petroleum Index represents the oil complex (crude, gasoline, heating oil).


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So-called “softs” and agriculture are leading the way higher. Softs consist of sugar, coffee and cotton. Agriculture represents corn, soybeans, wheat, sugar, soybean oil, coffee and cotton. The message here is clear. Prices for agricultural related commodities are rising, and rising fast. The DJ-UBS Softs Index ($DJASO) has almost doubled, while the DJ-UBS Agriculture Index ($DJUSAAG) is up over 65%. These big gains will almost certainly filter down into the prices at the retail level, which would be inflationary. Perhaps that is why bonds are down sharply over this same timeframe.

PERCENT OF $SPX STOCKS ABOVE 50-DAY REMAINS BULLISH

The S&P 500 %Above 50-day SMA ($SPXA50R) indicator is a breath gauge that measures the degree of participation. In this instance, the indicator tells us the percentage of S&P 500 stocks that are above their 50-day SMAs. In general, a bullish bias exists when more than 50% are above their 50-day SMAs and a bearish bias otherwise (<50%). Using the 50% line to signal shifts can result in whipsaws so it is often helpful to apply a filter. For example, a bullish threshold could be set just above 50% (55%) and a bearish threshold could be set just below (45%). Even though this filter creates a little lag, it reduces the number of signals and whipsaws.


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The chart above shows the S&P 500 %Above 50-day SMA moving above 55% in early September and remaining in bull mode the last four months. Prior signals are shown with green and red arrows. In fact, the indicator has not even dipped below 55% since this cross. Chartists may notice a bearish divergence from October to January as the indicator formed a lower high and the index pushed to new highs. This shows participation narrowing somewhat. However, keep an eye on the absolute levels. The S&P 500 hit a new 52-week high this week and 77.8% of its components are above their 50-day SMA. This is much less than mid October and early January, but anything above 70% is more than enough to power a rally. The bearish divergence does not show material weakness. It simply shows less strength than before. Look for a move below 45% to reflect actual weakness within the index. See our ChartSchool article for more details.

DIA MOVE TO NEW HIGH WITHOUT SUPPORT CAST

The Dow Industrials SPDR (DIA) led the market this week with a new 52-week high on Friday. Not bad considering the Russell 2000 ETF (IWM) suffered its biggest weekly loss since early August. Overall, the up trends for the major index ETFs remain in place as they recorded new 52-week highs this week. The Russell 2000 ETF (IWM), S&P 500 ETF (SPY), S&P MidCap 400 SPDR (MDY) and Nasdaq 100 ETF (QQQQ) recorded their new highs at the beginning of the week, but peaked on Wednesday and were down for the week. Led the strength in IBM on Wednesday on General Electric on Friday, DIA finished the week on a strong note.


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Despite strength in Dow Industrials SPDR, the Russell 2000 ETF and the Consumer Discretionary SPDR have been relatively weak since mid December. The chart above shows the Price Relatives peaking in mid December. The IWM:DIA took a major hit this week and moved to its lowest level since late November. The XLY:DIA Price Relative has been working its way lower the last five weeks. The QQQQ:DIA Price Relative also took a hard hit this week. Even though DIA is doing its part, relative weakness in small-caps (IWM), the most economically sensitive sector (XLY) and large-techs (QQQQ) cast a shadow on this week’s rally.