Remember to share:
Share

During the past five weeks the stock market held its own, holding key support levels and avoiding any major losses. The S&P 500 remains near its highs, holding above key support as it has been consolidating within a narrow trading range. Nonetheless, bullish momentum slowed down in US equities during March. This is normal considering the huge upside thrust that occurred in January and February. The Nasdaq Composite continues to lead the S&P 500 in relative strength, a bullish sign.

Fewer stocks have made new highs during the advance because of the decrease in momentum. Financials and small caps were the leaders of the advance in the aftermath of the election. However, they have weakened considerably in the past month. Continue to give the benefit of the doubt to the bulls. On any weakness look for buying opportunities with the expectation of another rally attempt taking place sooner rather than later.

Buying Opportunity in Energy

One of the worst performing sectors in the first quarter was energy. But that might be about to change. The short and intermediate term has shifted from down to up. This could present an opportunity to buy low rather than chasing a rally.

Energy Select Sector SPDR ETF XLE Daily (TOP) and MACD 12-26-9 (Bottom

The top chart is the Energy Select Sector SPDR (XLE) that tracks the Energy Sector Index, investing in common stocks in the Oil, Natural Gas, and Oil & Gas Drilling & Exploration industries.  As of 04/7/17 its top 4 holdings are Exxon Mobil Corp (XOM) 23.11%, Chevron (CVX) 15.47%, Schlumberger Ltd (SLB) 8.23%, and Conoco Phillips (CON) 4.66%, totaling 51.47%. Be aware the XLE is an aggressive investment vehicle.  The XLE 90-day volatility is 1.72 compared to the S&P 500 of 1.00.

The XLE peaked on 12/16/2016 at 78.45 and steadily declined through the first quarter of 2017, making lower highs and lower lows forming a down trend. The XLE bottomed 03/27/17 at 67.86. The downtrend was broken on 04/05/17.   However, the XLE reversed to close near its lows suggesting the breakout could be false.   There was no follow through to the downside so investors stepped in to buy.  On 04/10/17 the XLE closed clearly above the downtrend line and is in the process of testing the breakout.  Short term support is at 70.00, resistance is at 73.00.

The bottom half of the chart shows the 12-26-9 MACD, a technical indicator that shows you  changes in direction, momentum, and strength of the stock’s price. MACD generated a buy in late March from an oversold condition below 0, is gaining momentum, and has broken its downtrend from its December 2016 peak after moving sideways since February.  This suggests the downside risk should be contained in the near term.

Energy Select Sector SPDR ETF XLE Weekly (TOP) and MACD 12-26-9 (Bottom)

The top portion shows the weekly SPDR S&P Energy Select SPDR ETF (XLE).  The XLE was trending higher for 2016, peaking at 78.45.  This year the XLE has been the opposite, out of favor by investors, much weaker than other sectors to start the year.  The XLE this past week broke the weekly downtrend (purple line), shifting the intermediate trend to up.  Resistance is at 76.00.  A break below the recent low at 67.86 would negate my near term bullish outlook and increase the odds of a further decline.

The bottom half of the chart is MACD (12, 26, 9) a technical indicator that measures momentum. MACD gave a sell in January. However, MACD has now reset, falling to below 0.  Downside momentum has subsided.  If the XLE turns up now, MACD would generate a fresh buy signal supporting the bullish case the XLE is ready to resume its bullish trend from 2016.

In Sum:

The market continues to be resilient.  The S&P 500 is holding above key support consolidating within a narrow trading range.   Another rally attempt toward new highs is possible sooner rather than later. Continue to give the benefit of the doubt to the bulls on any weakness looking for buying opportunities.  A buying opportunity has developed in the energy sector (XLE).  The short and intermediate trend has shifted from down to up.  As long as the XLE remains above 67.86 you can anticipate higher prices in the near term and risk to be limited.

I would love to hear from you. Please call me at 516-829-6444 or email at bgortler@signalert.com to share your thoughts or ask me any questions you might have.


If you like this article, then you will love this!
Click here for a free report:
Top 10 Investing Tips To More Wealth

 

*******Article published by Bonnie Gortler in Systems and Forecasts April 13, 2017

Discover the right wealth building attitude…

Download a Free chapter of my book
Journey To Wealth

 

 

 

 

 


Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.

Remember to share:
Share

A possible breakout to the upside in US equity averages failed once again in the past week. However, the S&P 500 has almost recovered from its recent losses with a potential key reversal day to the upside on 05/27/15. The technology sector, represented by PowerShares QQQ (QQQ, tracking the Nasdaq 100 Index) is acting better. The semiconductors (see chart of SOXX below) are strong, showing leadership, already penetrating January’s high which is bullish for the technology sector and good for the overall health of the stock market.

SMH 052915 Newsletter

Power Shares QQQ Daily Price and Trend Channels (Top), and 12-26-9 Daily MACD (Bottom)

0527qqq dailyThe top part of the chart is the Power  Shares QQQ Trust; an exchange traded fund (ETF) based on the Nasdaq 100 Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. As of 5/26/15, Apple, (AAPL) is the largest holding comprising 14.61% and Microsoft Corp (MSFT) is the second largest holding at 7.40%. Both stocks peaked in late April, like the QQQ, but their present chart patterns appear favorable supporting higher prices for the QQQ. The top portion of the chart above shows how the QQQ has been unable to get through the top of the short term daily channel. Each time it was near, prices turned down. A closing price above for two days would be considered a breakout. Resistance now is at 112.50, with the uptrend since October 2014 (pink line) in effect. First support is at 107.50. A break below would suggest prices could quickly fall to the lower daily channel at 105.00 followed by 97.00. The lower portion of the daily QQQ chart is MACD, a momentum oscillator. When it is above 0 and rising, it indicates increasing momentum. There is also a slight upside break in the downtrend from March (Pink line) that has positive short term implications.

As long as QQQ is above 107.50, look for higher prices. Power Shares QQQ Weekly Price and Trend Channels (Top), and RSI 14 (Bottom) 

052717 qqq weeklyThe top portion of the weekly QQQ chart (to the right) also shows how QQQ for the intermediate term has stopped rising when price is near or at the top of the channel. QQQ remains above its recent breakout to the upside (pink line). The top channel objective is 112.50, the same area of resistance as the daily chart. When the QQQ moves through the resistance level, the next objective is 124.00. The lower portion of the chart is the Relative Strength Index, (RSI 14), a momentum indicator developed by Welles Wilder. It would be bullish, confirming higher prices ahead if the downtrend is broken. It is now very close to breaking the trend line from July 2014. If broken, expect further strength that could be could be sharp and fast, potentially triggering any buy stops that investors could have in place. Watch the indicator to see how high the reading gets before it turns down. If the RSI could get to 70 or above it should buy more time for the bull market environment: A secondary test of the price highs in QQQ would most likely happen before a major top would be in place.

Monthly QQQ/SPY Ratio (Top) RSI of QQQ/SPY Ratio (Bottom) 

052715 qqqspyrel strengthThe top part of the chart is the monthly ratio QQQ/SPY ratio. A rising line means the Nasdaq 100 is stronger and if falling, the S&P 500 is stronger. With the line continuing to rise, this confirms the long term strength in the QQQ vs. the S&P, which normally bodes well for the stock market. The monthly ratio is at its highs and rising is additional evidence that the bull market in technology remains in effect. This bodes well for the QQQ to suggest that the QQQ will break through the top of the daily and weekly channel. The lower chart above is the RSI of the QQQ/SPY Ratio shows a favorable uptrend from early 2013 in effect. The RSI of the QQQ/SPY ratio is trading near its highs at 70.80. With the rally in technology since March, the small double top pattern that was forming has been negated, alleviating any sign of potential danger at this time.

Just To Sum Up: The market has been unable to have a significant breakout to the upside. The technology sector is close to breaking through the top of the short and intermediate term channels. Momentum patterns in the technology sector are favorable and could be the catalyst for an upside breakout. As long as QQQ is above 107.50, look for higher prices in the stock market. If QQQ penetrates 112.50 on a closing basis for two days it would be considered a breakout and the next leg of the advance could begin. I would love to hear from you! Any thoughts, questions comments, feedback; please call me at 1-844-829-6229 or email at bonniegortler@signalert.com

Sign Up For Your Free Trial of the Systems and Forecasts newsletter where I am the Guest Editor Click Here http://bit.ly/1fM79hp

Remember to share:
Share

Money is hard to earn and easy to lose. Guard yours with care.” -Brian Tracy

Key points for Intermediate Momentum Patterns Warn of Possible Decline AheadDuring its most recent meeting the Federal Reserve announced that it still plans to most likely raise interest rates in the second half of this year, but investors were hoping they would delay raising rates until even later. Since rate hikes are normally not bullish, investors are more nervous and have been investing in the defensive areas of the market. The S&P 500 (SPY) declined in January but has reversed sharply to the upside to begin February. The S&P 500 (SPY) has been trading within a trading range, testing its lows already four times this year. On February 2, the December 16 low of 197.60 was successfully tested. Now this level is even more of a signifi cant support area that needs to hold going forward.

Big intraday volatility is the theme for 2015. Large swings up and down have occurred during many trading sessions and we are only in the first week of February. This phenomenon is very different than the quiet market that we had for most of 2014 that sometimes lulled you to sleep, and gave a feeling of comfort and safety. Traders appear to be more optimistic and have moved into more aggressive areas with more volatility, commodities such as oil, gold, and silver.

Emerging markets have stabilized helping the foreign markets. The iShares S&P Europe 350 Index (IEV) ETF is acting better, gaining in relative strength, supporting the US market. Europe (IEV) has broken the weekly downtrend mentioned in the January 23 2015 newsletter, bullish for the US market if IEV holds from here and doesn’t turn back down. A possible change in sector leadership could be taking place. Traders don’t seem as high on healthcare, utilities, and staples.

Even with the successful test of the lows that we have had, and the strong recent rally to the upside I remain somewhat concerned with how far the advance will go. The technical patterns on the intermediate and long term charts of the US major averages have had large price gains over the past years, remain extended and momentum is weakening, not a good sign.

What Are The Charts Saying Now?

Power Shares QQQ Weekly price and trend channels (Top), and 12-26-9 week MACD (Bottom)

020415qqqweekly

The top part of the chart is the Power Shares QQQ Trust, an exchange traded fund (ETF) based on the Nasdaq 100 Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The top holdings as of 02/03/2015 are Apple (AAPL) 14.45%, Microsoft (MSFT) 7.12% Google Inc. (GOOG) 3.73%, Amazon AMZN 3.5% and Facebook Inc. (FB) 3.4%. Apple, the largest holding, has been consistently helping the index trading near its highs, while the other holdings have had wide up and down swings.

The top portion of the chart shows how the QQQ made its high stopping at the top of the channel on 11/26/14, at 106.24. Each subsequent rally attempt has not been able to penetrate this high. Instead, QQQ has a made a series of lower highs to from a down trend, not a good sign. QQQ would have to trade above 105.00 to break the weekly down trend.

The lower portion of the chart is MACD, a momentum oscillator. The oscillator is trading above 0, but falling, which shows weakening momentum. The chart also shows a negative divergence in place, which is potentially bearish. (QQQ made a new high in November, but the November peak in MACD was lower than its late-August peak.) On each pullback, QQQ held its ground near the previous lows before prices rebounded. The uptrend in MACD from January 2013 is threatening to be violated to the downside. If the trend line is violated then I would expect further weakness ahead. So far, we have not seen any violation. If the highs aren’t taken out on this latest rally attempt and prices fall back down and take out the lows of January 2015 at 99.36 then I expect the QQQ to move toward the lower channel 93.

Weekly QQQ/SPY Ratio (Top) RSI of QQQ/SPY Ratio (Bottom)

0204qqq spyweekuse trndlinesNotice in the top chart the ratio peaked in October 2014, followed by another rally attempt which failed to take out the high. In January the
QQQ/SPY ratio once again showed some strength, but didn’t generate enough momentum to make a new high.

When QQQ is stronger than SPY, this normally bodes well for the stock market. This was the case for most of 2014 when the line was rising. Now the QQQ/ SPY ratio has turned down and is also threatening to break the uptrend from April 2014 which would change the trend and not be bullish for the market.

The RSI of the QQQ/SPY Ratio (lower chart) is also looking worrisome. The uptrend from April 2014 has already been violated to the downside in 2014 and momentum continues to weaken, not a good sign. There is a good possibility that the high in QQQ/SPY has been made and that the overall leadership has changed to now favor SPY over QQQ.

Just To Sum Up.

Big intraday volatility is happening every day and expected to continue. The international sector appears more stable with Europe, my favorite sector breaking its weekly downtrend supporting the overall US market for the time being. The US major averages have a stalled near their upper ranges and have made slight lows near the bottom of their range for the past few months. There are conflicting signals with our models bullish, but charts imply increased risk. It would be bullish if the QQQ trades above 105.00 which would break the weekly down trend and bearish suggesting a further decline if the recent low of 99.36 is violated. Review your portfolio and make sure that you are comfortable with your portfolio if the recent lows are violated and a decline was to start sooner rather than later on this year.

I invite you to share your insights by calling me at 1-844-829-6229 or Email me at bgortler@signalert.com with your questions or comments.

Grab your Free 3 Issue Trial of the Systems and Forecasts

newsletter where I am the Guest Editor http://bit.ly/1fM79hp

Remember to share:
Share

“Investment planning is about structuring exposure to risk factors.” – Eugene Fama Jr.

The stock market had a profitable month in June, defying the adage to sell and go away in May. Many sectors were stronger than the S&P 500 (SPY) which is no longer a leader of the market but still making highs nonetheless.The S&P 500 SPDR (SPY) has consistently moved higher this year, a fine place to invest while being less volatile than other sectors.

You can see from the Table 1 that investors were selective. in what sectors There was a wide range of performance last month from +5.51% for energy  to -0.24%) for consumer staples. Utilities and Finance were the also strong and Industrials was another laggard.

                                                                                                       Table 1

June 0630 Performance
The iShares Russell 2000 Index ETF (IWM) small cap was a leading market index, gaining over 5% as the market rally broadened in scope. On July 1, IWM hit my objective of 120 (mentioned in the 06/20/14 newsletter), slightly surpassing the 3/04/14 high. After making the high, a slight retracement back to the breakout level occurred, including a price drop due to a $0.45 dividend.

What is the S&P 500 SPDR (SPY) Monthly Chart Saying Now?

Since we are at the beginning of a new month, I thought it would be good to review where we are on the monthly S&P 500 (SPY), chart which is trading at it top channel 197.00, (like small caps), and which are also at a very key resistance area (not shown).

One of my favorite tools for chart analysis is the Andrew’s Pitchfork developed by Alan Andrews. I use Andrews’ Pitchfork for identifying major channels that I think have significance. Many charting software packages give you this option to draw easily and they can be used on all time periods when trading. To be able to use this technique you need three points, each marking an important pivot point which I have identified above.

You will see in the monthly SPY chart (right) that price is rising in an uptrend with a major low-high-low point configuration that I have  connected. Notice how we are at the upper channel line, a very critical point. This is a major resistance line where the S&P 500 is now. If SPY can make further highs by penetrating the 197 area, this would be a bullish development and I would expect higher prices moving into the summer months. Higher projections from using the Andrew pitchfork analysis would be 220 followed by 245 while support is 170 followed by 145.

070114 monthly S&P500 pitch

The lower portion of the chart is MACD, a momentum indicator which is at its highest reading confirming the price high. Also notice the uptrend in place with no violations taking place from the March 2009 low.

S&P 500 SPDR (SPY) Daily Chart

There are two key uptrend lines that are significant on the S&P 500 daily chart (below). The first trend line connecting the lows from April 2014 is steep with support at 193.00. The second trend line has more significance with support at 189.00. This line would likely attract traders to do some more selling of their investments. A break below would give a downside objective to 178. As long as both of these uptrends remain intact, I expect price to continue to achieve another milestone and trade over 200.00.

063014 spydailyPrices continued higher and no major sell off has occurred. Once again there are negative divergences in MACD and RSI(14) that need to be watched. As price has moved higher during the uptrend, there have been negative divergences where price makes a high and momentum doesn’t confirm. The bearishness of these negative divergences is mitigated by the fact that there has been no breaks in the
momentum uptrend lines for either MACD or RSI in the daily chart.

Watch for the daily chart to give a clue of further diminishing momentum, which could be a sign when the next selloff takes place. This could be potentially of more significance than what we have had so far this year. I continue to give the market the benefit of the doubt.

Just To Sum Up

The stock market continued to rise in June reaching upper channel objectives on the S&P 500 (SPY) and the Russell 2000 (IWM). Momentum is weakening which could be a potential problem later on. But for now, the uptrend remains intact with the bulls in full control. The market tape action is positive. The numbers of stocks making new lows are very small, market breadth is moderately favorable, and more aggressive sectors have joined the rally. I continue to give the market the benefit of the doubt and I’m expecting the market to break through resistance giving new higher upside channel objectives.

I invite you to share your comments by Emailing bgortler@signalert.com or call Bonnie at 844-829-6444.

Sign up for a Free 3 Issue Trial of the Systems and Forecasts newsletter
where I am the Guest Editor http://bit.ly/1fM79hp
Remember to share:
Share

 “The ability to say “no” is a tremendous advantage for an investor.–Warren Buffett

The first quarter is complete, with S&P 500 gaining 0.86% for the month and 1.86% for the recent quarter (total returns). The S&P 500 index continues to be resilient and consistent; a profitable area in which to be invested Stock market volatility has quieted down. The VIX, (a fear index) continues to be trending lower, a plus for the stock market. With the S&P 500 near its highs VIX is showing no fear, now trading at 13.17, below the level 13.72 where it closed on December 2013.

The S&P 500 is gaining relative strength compared to other more volatile areas in the market. The old leaders of the market, Nasdaq 100 (QQQ) and Biotech (XBI) which have more volatility and risk, are losing momentum, not a good sign as we move further into the year. In late February when the S&P 500 had a short term decline, the technology sector started to lose momentum and biotech fell sharply, down 16.3% from its peak on February 27th.The Nasdaq 100 (QQQ) and Biotechnology (XBI) average have been leaders of the stock market but are not acting well. They are trading below their highs, are risky, and are giving warnings that they will under perform with their leadership coming to an end. This doesn’t bode well for the market. The internal strength of the market is getting weaker, not improving; a shift of capital is taking place as the S&P 500 is making new highs.

What are the Weekly Nasdaq 100 (QQQ) and Biotechnology (XBI) Strength Ratio Charts Saying Now?

See the chart below,  the weekly Relative Strength ratio chart of the QQQ/SPY where I have drawn two trend lines. In late February 2014, the Nasdaq’s uptrend since July 2013 was broken, suggesting the S&P 500 will be stronger than the Nasdaq. In the lower portion of the first chart below, MACD confirms the trend line break. Momentum is decreasing in the Technology area.

The second (lower) chart is the weekly XBI/SPY relative strength ratio that made a low in November 2011. Since then, biotech (XBI) has been a very profitable area to be invested in. Each time the XBI has declined, this trend line has held. In the lower portion MACD has just generated a sell. The upside momentum is weakening and there is a good chance the up-trend will be broken soon. When this occurs a more serious decline could take place in the overall stock market and a larger correction than what we have had will occur.

rsi qqq xbi wkly

The top half of the chart below is the weekly Nasdaq 100 (QQQ). Notice the two major uptrends have not been violated as of yet. With momentum weakening (MACD of QQQ has formed a falling double bottom,which is bearish), I believe that both trend lines will be broken as investors move out of the technology area into more safe areas later this month.

The lower portion of the below chart is Biotechnology (XBI).The uptrend remains intact from 2011. Both of these uptrend trendlines remain in effect even with Biotech (XBI) peaking at 172.52 and falling to 136.47, a drop of 20.90% from high to low.We are short term oversold;a bounce is in progress as of this writing. (XBI trading at 144.82). I am expecting a reflex rally that could go as high as 155 and then more selling pressure which would break the up-trend. A break below 136 would suggest prices falling to 125 and potentially 110.

 xbi 0331 use newsletter
Just to Sum Up

The price uptrends in technology and biotechnology (QQQ and the XBI) remain in effect for now, but warning signals are being generated as momentum is clearly weakening for the intermediate term. Sector rotation seems to be taking place in certain areas of the market. Investors are moving away from sectors that were leading the bull market higher such as biotechnology and technology, but which are now losing relative strength compared to the S&P 500.

The stock market continues to climb the wall of worry. When the market declines key support zones have been holding. Money is moving into the emerging market sector, high yield bonds are stable, and new lows are small which are all bullish. If the weekly trend lines of QQQ and XBI are violated to the downside, is a good chance the selling pressure will spread to the overall market. I continue to give the market the benefit of the doubt for the moment, but my suggestion is to avoid taking new positions in the technology and biotechnology areas of the market. If you are invested in these areas protect the gains that you have made.

What are your thoughts about the technology and biotechnology sectors? Are you expecting higher or lower prices?

Please contact me with any comments or insights, and to share your own favorite charts and indicators with me. Email: bgortler@signalert.com; phone: 1-800-829-6229.

FULL YEAR  OF SYSTEMS & FORECASTS NEWSLETTER

at a SPECIAL DISCOUNT – $99

This is a hypothetical result and is not meant to represent the actual performance of any particular investment.  Future results cannot be guaranteed.

Although the information is made with a sincere effort for accuracy, it is not guaranteed either in any form that the above information is a statement of fact, of opinion, or the result of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments discussed above for their own particular situations and for determination of their own risk levels.