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U.S. stocks were quiet early in March as the major averages traded in narrow ranges closing at the end of the day near their highs. This phenomenon changed as the month moved on. Buyers turned to sellers. The S&P 500 was down more than 1% in a single day, which didn’t happen for 5 months previously.  The Financial sector and Small Cap sector that led the market higher weakened. Technical momentum oscillators were extended, showing loss of momentum, ripe for a short term pullback.  The short term trend changed from up to down (based on charting methods).

What ETF to Watch To Guide You for Direction?

 

SPDR S&P Financial Select SPDR ETF (XLF) Daily Price (Top), and MACD 19-26-9 (Bottom)

The top part of the chart shows the weekly Financial Sector SPDR (XLF), an exchange traded fund (ETF) that tracks a mix of diversified financial service firms, insurance, banks, capital markets, consumer finance and thrift companies. As of 03/28/17 the top holdings of XLF are: Berkshire Hathaway B, (BRK.b) 10.97%, JP Morgan Chase & Co (JPM) 10.86%, Wells Fargo & Co (WFC) 8.65%, Bank of America Corp (BAC) 8.08, and Citigroup Inc. (C), 5.65%.   Historically it’s a sign of a healthy market when financial stocks are strong, showing signs there is economic growth.  The S&P 500 (SPY) also tends to do well because the S&P 500 index has 16.48% of its holdings in the financial sector, only the technology sector is higher at (19.25 % through 02/27/17.

Investors shifted assets to financial stocks after the election. The XLF peaked at 25.29 on 03/02/17.  A pullback followed a few weeks later, breaking its short term trend up trend on 03/17/17, two days before the S&P 500 (SPY) broke their daily trend line.   Notice how the XLF retraced all of its 2017 gains, stopping above a key support area (green rectangle), at 22.97, holding above the December 2016 low at 22.84.

Many times once an uptrend is broken after a test of an important support area, another rally attempt will occur. This looks like what is happening now.  The XLF just penetrated its down trend, a positive sign for a short term rally to begin.  If the decline is over, the XLF should challenge its down trend line from the peak, around 24.50, (green line).  If the XLF stalls and turns lower, then look for another test of the support area. A break below would be considered bearish. A break above 24.50 would suggest another attempt at the March highs.

The bottom half of the chart is MACD (12, 26, 9) a technical indicator that measures momentum.  MACD is now oversold, below 0, and has a favorable pattern forming.  If the XLF rises for a few days in a row a buy will be generated.  Keep an eye out for the downtrend in MACD to be broken. This would confirm the short term decline is over and further gains are ahead.

  

 

SPDR S&P Financial Select SPDR ETF Weekly Price (Top), and MACD 19-26-9 (Bottom)

The top portion shows the weekly SPDR S&P Financial Select SPDR ETF (XLF) active trading channel (purple lines). The XLF had a huge advance, breaking through its upper channel.   However, a false breakout materialized, the XLF couldn’t sustain its rise and the XLF declined by 9.2%, holding above its weekly low made in December 2016 (red circle).  The intermediate trend is up. The uptrend remains intact.

A break below the recent low at 22.97 would increase the odds of a further decline that would potentially break the uptrend, and would shift the intermediate trend from up to down.

The bottom half of the chart is MACD (12, 26, 9) a technical indicator that measures momentum.  MACD has just given a sell.  But I am not worried about this MACD sell because it was not accompanied by a negative divergence. Moreover MACD did make a new peak to confirm the price high and its uptrend is intact.  Usually when you have a powerful thrust as XLF did, another rally attempt occurs after the first decline.  As long as the uptrend is in effect the odds favor the bulls. If the downtrend is broken (black line) a warning sign would be given and the bears most likely would come out of hiding.

In Sum:

Our equity models remain overall neutral-positive, implying further gains are likely for the intermediate term (weeks–months). Look for wider intraday swings, as the historically favorable seasonal period will be ending in April.  Financials have lost some of the luster they had early in the year but resurgence could begin soon.  The recent decline appears to be over if the recent low at 22.97 holds.  As long as the uptrends remain intact for the intermediate term (weekly chart) in terms of price and MACD, give the benefit of the doubt to the bulls.  Time will tell.

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.


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*******Article published by Bonnie Gortler in Systems and Forecasts March 30, 2017

 

 

 

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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.

 

 

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February had a strong month of gains following January’s advance.  The Dow Industrials rose 12 straight days.  Healthcare (XLV), Utilities, and Financials were the leading sectors for the month along with solid gains by the Dow, S&P 500, and the Nasdaq.  Our trading models remain neutral-positive and the tape remains bullish.  Up trends are intact.  Some indices have met their intermediate channel objectives including Regional Banks, (KRE) Nasdaq 100 (QQQ), and Russell 2000 (IWM); however there is a good chance more gains are ahead. The bulls remain in control.

What Do You Want To Watch Now?

The top portion of the chart shows the weekly iShares Russell 2000 Index ETF (IWM) which is made up of companies with a market capitalization of between $300 million and $2 billion. After the election the Russell 2000 (IWM) skyrocketed.  The IWM made a high of 138.85 on 12/08/16 overshooting slightly its channel objective at 138.00 (green rectangle).  After making a high, the IWM moved sideways for about 8 weeks, not giving up much ground.

As of March 1st, a potential breakout may have begun.  The upside objective is 157.00 while support is at 133.00.

The lower portion of the chart is MACD, a technical indicator that measures momentum.  MACD is overbought, confirming the new high made in IWM.  If the rally stalls MACD can give a sell quickly.  Its bullish, the uptrend from January 2016 is in effect, and MACD has confirmed the IWM high.

iShares Russell 2000 ETF (IWM) Weekly Price (Top), and 12-26-9 Week MACD (Bottom)

The top part of the chart is the weekly (IWM) Russell 2000 Index / (SPY) S&P 500 Index Ratio (IWM/SPY).  A rising line means the IWM is stronger, and if falling, the SPY is stronger. The IWM/SPY ratio peaked on 12/05/16. The IWM has clearly been losing strength, however the uptrend from January 2016 (black line) is intact.

The lower portion of the chart is MACD, already on a sell warning of a potential change of leadership.  Not only is momentum weakening, but at the same time the IWM/SPY relative strength ratio has broken it’s up trend. Also, the average daily trading range for the past 25 days has been more than double the SPY.  Even though the IWM has the potential to be breaking out, if you are heavily weighted in small caps, it may be a good time to reduce your exposure and lower your risk, shifting part of your assets to the SPY.

The SPDR S&P 500 (SPY) Weekly With Channel (Top) and Weekly 12-26-9 MACD (Bottom)

The chart above is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S. As of 03/01/17 its top 4 holdings in the S&P 500 were Apple Inc. (AAPL) 3.58%, Microsoft Corporation (MSFT) 2.45%, Exxon Mobil Corporation (XOM), 1.66% and Johnson & Johnson (JNJ) 1.64%.  Investing in the S&P 500 gives you a broad representation of the overall large-cap U.S. stock market.

The top part of the chart shows the S&P 500 (SPY) weekly trading channel.  The S&P 500 (SPY) has been in an uptrend since December 2016 and steadily rising since the election.  While the Russell 2000 (IWM) is at its top of its trading channel, the SPY still has some room to go before hitting its upper channel at 245.50.

The bottom half of the chart shows MACD, confirming the highs in the SPY. This is bullish.

Just To Sum Up:

The tape remains strong. Major averages continue to make new highs and pullbacks have been minor.  The Russell 2000 (IWM) has met its intermediate objective.  The SPY has taken over leadership in terms of relative strength. Even though the IWM has the potential for a break out, if you are heavily weighted in small caps, it may be a good time to reduce your exposure, lowering your risk by shifting part of your assets to the SPY.  Our models remain overall neutral-positive so stocks could rise for several more weeks. As long as the Russell 2000 (IWM) stays above its support at 133.00 and the SPY stays above its hourly support of 234.00, you can expect higher highs. Continue to give the benefit of the doubt to the bulls.

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.

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*******Article in Systems and Forecasts March 2, 2017

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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.

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The time of maximum pessimism is the best time to buy and the time of maximum
optimism is the best time to sell.
” ~John Templeton

New record closing highs seem to be a normal occurrence during 2017 as the Trump rally continues.  Equity markets have been going up on expectations of increased infrastructure spending, decreased regulation, and lower corporate taxes.  The advance has been broad, although some sectors have clearly been stronger than others.

Some major averages are near the top of their channels as some stocks have had hefty gains.  There are many favorable looking charting patterns, while others are in the process of the beginning stages of a parabolic advance.  This is a chart pattern in which prices rise (or fall) with an increasingly steep slope.   When the advance stops, a large decline follows that you want to avoid.

Our trading models remain neutral positive and the tape remains bullish.  The best kind of advance is the one where pullbacks are very minor and price continues higher, as investors wait for the decline which doesn’t happen.  This appears to be what is happening now.   The trend is your friend.  For now, enjoy the ride.

PowerShares QQQ ETF (Nasdaq 100 Index) Weekly Price and Trend Channels (Top), and MACD 12-26-9 (Bottom)

The top part of the chart shows the weekly Power Shares 100 (QQQ), an exchange-traded fund based on the Nasdaq 100 Index and its active trading channels.  The QQQ includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq stock market based on market capitalization.

As of 02/13/17, Apple, (AAPL) is the largest holding comprising 11.83%, Microsoft Corp (MSFT) 8.25%, Amazon.com, Inc. (AMZN) 6.53%, Facebook, Inc. Class A (FB) 5.15%. Alphabet Inc. Class C (GOOG) 4.65% and Alphabet Inc. Class A (GOOGL) 4.09%, totaling 40.50%.   All the top holdings have rebounded this year after being out of favor before the election.   Apple (AAPL), its largest holding has had significant gains already this year, and has higher upside projections that will help the QQQ, and has favorable implications for the technology area over the next several months.

Revisiting the article in the Systems and Forecasts newsletter on 01/13/17 “Breakout in Technology Looms”, QQQ looked poised for a breakout.  This indeed did happen.  The QQQ is getting close to its 130.00 objective, closing at 129.40 on 02/15/17.

It looks like the QQQ could start another leg up, going through 130.00 to potentially reach 139.00 (orange line), the next target.  As long as the QQQ is above the up trendline line, the trend is up.    The trend line is important; it coincides with the break out at 123.00 that is now acting as support.  For another leg up to start, the QQQ needs to close above 130.00 for 2days and declines should be contained between 1-3%.  If the QQQ falls below the up trendline my bullish outlook will be negated.

The bottom half of the chart is MACD (12, 26, 9) a technical indicator that measures momentum.   MACD is overbought, however still rising, and gaining momentum which is positive.   MACD has confirmed the price high suggesting even if the QQQQ would decline another rally attempt would occur.

QQQ Performance Will Be Helped By Apple: Long Term Trend Is Up

AAPL Monthly Price and Up Trend Line (Top), and MACD 12-26-9 (Bottom)

** Apple’s stock underwent a 7-for-1 split, giving 6 additional shares to each shareholder on 06/09/2014.  The stock closed at 645 becoming 92.00/per share.

The top chart is a price chart that shows the high-low-close each month of Apple since 2005.  The Black line is the prevailing key uptrend line.  As long as Apple’s price is above the uptrend line, the trend is up and further profit potential on the long side is likely.   Apple was under selling pressure since its high in April 2015, when it was out of favor by investors.  In September 2016, Apple broke its down trend (orange line), and investors stepped in to buy.   After its quarterly earnings were announced on 01/31/17, Apple gained 11.7% (121.35-135.60 as of 02/15/17 intraday) and then soared ahead breaking its all-time intraday high of $134.54 set in April 2015 on February 14, 2016.

The bottom half of the chart is MACD (12-26-9), a technical indicator that measures momentum.  MACD is on a buy, and has a very favorable pattern turning up from an oversold condition below 0, where good buying opportunities develop.  This certainly has been the case for Apple.

In 2009 MACD was oversold, below 0, and generated a buy.  MACD rose into 2011 while MACD went sideways into 2012 as Apple stock continued to rise from 11.76 to 100.72, +756% gain.   MACD turned down crossing its signal line in 2012, generating a sell in 2013.  Apple fell from 100.72 to 52.55, a 47.8% loss.  MACD then started to flatten out forming a rising double bottom formation (one of the most bullish formations to look for on charts and make money).  Apple rose from 52.55 to 134.54, +156.0% gain. MACD peaked in 2015, turning down, losing momentum and Apple fell from 134.54 to 89.47, a -33.5% loss.

Apple’s latest rise off of the bottom is from 89.47 to 135.50, a gain of 51.5%. The good news is the MACD pattern remains very bullish even with its rise to new highs.  Next objective is 155.00 and support is 127.00.  There has been a definite shift in investor sentiment since the election and belief the company will benefit from potential changes down the road by President Trump. Time will tell.

Summing Up:

Major averages have made new all-time highs, a common theme of 2017.  The advance that is taking place is the best kind of advance, one where pullbacks are very minor and price continues higher as investors wait for the decline.  The Nasdaq 100 (QQQ) did break out in January, and could well be on its way to another 7% gain.  The trend is up.  Apple, its largest component has a very favorable MACD pattern suggesting there is more room to the upside on top of its recent gains.   The trend is your friend. Enjoy the ride.

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.

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.

If you like this article, then you will love this! 

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*******Article in Systems and Forecasts February  16, 2017

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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.

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The Nasdaq Composite, Dow Jones Industrial Average, S&P 500 and the NYSE Composite Index all had a favorable start in 2017, breaking out to new record closing highs after 6 weeks spent consolidating within a tight trading range. The Dow made it through the psychological 20,000 milestone and the Transportation average confirmed the Dow Jones Industrials’ new high. International indices, which have struggled, came to life and have improving technical patterns.

However, in the past week the averages couldn’t hold onto all of their gains even though support levels remain intact. Our trading models remain neutral positive. Some signs of concern showed up the last few days in January. Investors’ selling was spurred by investors’ uncertainty about world events, interest rates rising, and potential disappointment in earnings by major companies including Apple (AAPL), Facebook (FB), and Amazon (AMZN). Apple’s earnings were well received by investors. Apple’s stock rose sharply, now less than 5% from its all-time high with a very favorable long term monthly chart. Facebook rose on their earnings announcement lifting its stock to new highs, followed by some profit taking.

The concern is some profit taking after the S&P 500 stalled just below its key level at 2300. In addition small caps (Russell 2000 Index) and the financial sector (XLF and KRE) which had led the market higher since the election have now started to weaken.

What ETF to Track to Signal Further Gains or Trouble Ahead?

SPDR S&P Regional Banking ETF Weekly Price and Trend Channels (Top), and RSI 14 (Bottom)

 

The top part of the chart shows the weekly Regional Banking Index (KRE), an exchange traded fund (ETF) that began in 2006. KRE tracks an equally weighted index of common stocks of leading regional banks or thrifts (savings and loan associations). As of 01/31/17 the top holdings of KRE are: M&T Bank Corporation (3.64%), PNC Financial Services Group I, (PNC) (3.64), Citizens Financial Group, Inc. (CFG) 3.60, Fifth Third Bancorp FITB 3.59 %, SunTrust Banks, Inc. (STI) 3.58%, BB&T Corporation (BBT) 3.57%, and Zions Bancorporation (ZION) 3.57% totaling 25.19%.

Notice the clear trading channel in the top chart (the three green lines). KRE is not for the faint of heart. It’s a volatile index that I monitor intraday for the trend of the market and potential trend changes. Another financial sector ETF to follow is the Financial Select Sector SPDR (XLF), which is quieter than KRE. After the election, investors very quickly moved assets into the financial sector fueling the rally that rocketed KRE from 43.59 to 49.87 in one week, a 14.41% gain. Four weeks later KRE rose further to 56.29 a 12.87% gain, breaking through its trading channel surpassing the high made in November 2015.

However, KRE has stalled, consolidating for 9 weeks. It looks like KRE is at a critical juncture now.

A break above 57.00 would suggest KRE will challenge the upper channel at 59 over the next few weeks. If KRE can get through the upper channel a higher objective would be given and this would also have bullish implication for the overall market.

However, a break below its consolidation, 53.40 (red rectangle) would imply a potential test of 49.00

A break below 49.00 would suggest a serious decline is imminent.

The bottom half of the chart shows the Relative Strength Index, a measure of momentum developed by Welles Wilder. RSI is based on the ratio of upward price changes to downward price changes. RSI reached 82.43 its highest weekly reading since the ETF began in 2006. RSI readings of 70 or higher show strength and are most times considered bullish. Generally as long as RSI stays above 40, the trend is up.

When you have a powerful thrust as KRE did on its most recent breakout, this is normally not a sign of a top. Most times you would get a relatively contained pullback or sideways consolidation before another rally attempt would occur. It’s also a bullish sign the uptrend in RSI from 1/16/16 remains intact. RSI has lost some momentum, however its normal that momentum temporarily weakens after a huge rally before the next leg higher. As long as the uptrend is in effect the odds favor the bulls. If the downtrend is broken (black line) a warning sign would be given.

Summing Up:
The stock market is off to a good start in 2017 as many major averages have made new all-time highs. Our models remain neutral-positive. However, uncertainty about world events, interest rates rising, and company earnings remain in investor’s minds. The momentum of the rally since the election has slowed and the market is consolidating it gains. I recommend keeping an eye on the SPDR S&P Regional Banking ETF (KRE) for a sign of further strength or weakness that would give the clue of a potential change. For now the bulls remain in control.

If you have questions or comments on this article, please feel free to contact me at bgortler@signalert.com; phone: 1-516-829-6444. I would love to hear from you.

If you like this article, then you will love this! 

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*******Article in Systems and Forecasts February 3, 2017

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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.

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No drama has occurred in the stock market as October comes to a close.  Investors continue rotating assets among different sectors as the major averages remain within a fairly tight trading range. For the short term the market is oversold and has favorable momentum patterns suggesting another attempt toward the highs is possible.  Supporting the market is strength in the Technology (QQQ) sector, trading near their highs for the year.   A big concern I have is the weakening momentum oscillators on the intermediate and long term charts on many stocks and several market indices.

As long as the support levels remain in-tact, the bulls remain in control.  Each time the market trades near the top or bottom of their range, prices stall and move in the opposite direction.  On 10/13/16, there was a small scare when the S&P 500 (SPY) slightly violated support at 212.00 intraday, tripping stops by investors. The S&P 500 (SPY) fell to a low of 211.21, however no heavy selling followed.  On the same day the S&P broke below support, the Russell 2000 Index (IWM) held above its key support at 117.00. These are very important levels that need to hold.

Stock selection now is more important since market breadth has weakened considerably since the blast off from the February lows. There has been a lot of selling pressure in October by investors in health care (XLV), utilities (XLU) and real estate (IYR).  Recently there were 104 stocks on the New York Stock Exchange Index making new 52 week highs, diverging from their peak reading earlier this year in July when there were 414 new highs. This is not a sign of a healthy broad market.  The good news is 9/22/16, the New York Stock Exchange Cumulative Advance Decline Line made a new high.  It’s very rare a market top occurs without at least another rally attempt toward new highs.   As long as support levels hold, look for another attempt for the stock market to break out to the upside.

What Charts You Want To Watch Now:

 

The SPDR S&P 500 (SPY) Daily With Channel (Top) and 12-26-9 Week MACD (Bottom)

 102516-spy-daily-use

The chart on the top is a daily SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S.   The S&P 500 (SPY) is 1% from its lower channel and near its recent low.  On 10/13/16, the S&P 500 (SPY) fell below support at 212.00, and made an intraday low of 211.21. Since then, there has been an unconvincing rally staying within a tight range. There is resistance above at 217.00. If the S&P 500 goes above 217.00 this will get the bulls excited.  Under 212.00 the odds are likely the bears will rule and if the S&P 500 falls below 211.00 then expect heavy selling.

The bottom half of the chart shows MACD, a measure of momentum.   One of my favorite technical patterns has formed a positive divergence suggesting the S&P 500 will go higher.   A positive divergence is when you make a low in price (top chart) and the oscillator doesn’t make a lower low, instead the oscillator reading is higher showing positive momentum.   This is exactly what is happening now in MACD.   An added bonus, there is not only a positive divergence but there is also a slight penetration of the down trend. Until the uptrend is broken, give the benefit of the doubt to the bulls.

 The SPDR S&P 500 (SPY) Weekly Price And Channel

102416-spy-weekly

The chart above shows that the S&P 500 (SPY) has broken out of its trading channel, penetrating resistance in July 2016 (red circle).   The S&P 500 moved higher at first and then pulled back retracing its breakout and now is moving sideways.  Notice on the recent sell off, the S&P 500 fell slightly below the channel making a low of 211.21 holding just the above up-trend line.  For now, the intermediate trend is intact (the green line) and the trend is up.   If violated it would not be a good sign for the final week of October or the start of November.  Next support is the middle channel at 197.00, 9.35% lower from today’s close at 214.12.

iShares Russell 2000 ETF (IWM) Weekly Price With Channel

102416-iwm-weekly

The chart above shows the weekly iShares Russell 2000 Index ETF (IWM) which is made up of companies with a market capitalization of between $300 million and $2 billion.   The Russell 2000 (IWM) rose sharply from its February bottom. The IWM failed on 9/19/16 at 125.88 to penetrate its high made on 06/22/15 at 129.10.  The IWM turned down but is holding above the middle channel and above the uptrend line (blue line).   Both the middle channel and the uptrend line are in the same area acting as support. As is the case with the S&P 500 (SPY) the intermediate trend remains up for the IWM. The upside channel objective is 138.00.    As long as the IWM is above 117.00, higher prices are likely, however if the IWM falls below for two days on a closing basis, the intermediate trend would turn negative and the odds of a potential decline rise dramatically.

Summing Up:

The tug of war between the bulls and bears has not been decided.  The S&P 500 (SPY) and the Russell 2000 (IWM) remain in their trading range.   The market is short term oversold, and there is a positive divergence on the daily S&P 500 (SPY), bullish.   As long as the support level remains in-tact, I recommend giving the benefit of the doubt to the bulls.    If the S&P 500 (SPY) closes below 211.00 for two days expect the bears to come out of hiding and wider market intraday swings.   Another point of reference is watching the Russell 2000, (IWM) to hold above its key support at 117.00.  For now, the tug of war between the bulls and bears remain.

I would love to hear from you.   Please call me at 516-829-6444 or email at bgortler@signalert.com sharing 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 in Systems and Forecasts October 26, 2016

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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.

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042816 Key Points IWMMost stocks have continued to advance in April, another profitable month for investors.  On down days profit taking has been contained as the bulls remain in control. Investors appear fearless moving into higher risk sectors and away from defensive sectors.  An important question remains will the major averages break out to the upside, or is it best to sell and go away in May?

Time will tell if the market continues to rise without a pullback, leaving some investors missing out on further profits.  Our models remaining favorable,with above-average profit potential with risk well below average. I continue to give the benefit of the doubt to the bulls.  The easy money from the February lows appears over.  Stock selection regarding what sector to invest in will be important as we move further on in the year. Normally defensive sectors flourish as investors want quieter sectors as the calendar moves into the more unfavorable months of the year, May through October.  Defensivesectors such as utilities (XLU) and Consumer Staples (XLP) have lost some of their luster. Investors have beenmoving money out of these defensive areas in April. Keep an eye out if this recent trend continues.

The technology sector (QQQ and XLK) has not been a strong. Poor earnings from Microsoft (MSFT) and AlphabetInc. Class A (GOOGL) didn’t help this area. In addition, Apple disappointed investors and fell hard as well.

Technology was losing momentum fast compared to the S&P 500 (SPY) even before all of these earnings reports.

In the long run this is not a positive development and bears watching.

Listen here to the audio version of the article “Small Caps Gaining Momentum: Enjoy The Ride”

These are some of my favorite sectors giving a sign of a healthy market going forward.  The
financial sector (XLF) has penetrated its first level of resistance at 23.00 as mentioned in the 03/13/16 newsletter, 24.50 is next target. In addition Regional Banks (KRE) has joined in on the advance, a very strong performer in 2015.  Also market breadth remains strong; more stocks are participating in the rally, helping the Russell 2000 Small Cap Index (IWM) and the Mid Cap 400 (MDY) sectors of the market. Review the tape action clues to monitor that I discussed in the 04/14/16 newsletter for more of what it is needed for further gains ahead.  The
odds favor higher prices ahead.

What Are the Charts Saying?–iShares Russell 2000 ETF (IWM) Weekly Price (Top), and 12-26 Week

MACD (Bottom)

042716 iwm weekly newsletter use

The top portion of the chart shows the weekly iShares Russell 2000 ETF (IWM) which is made up of companies with a market capitalization of between $300 million and $2 billion. The Russell 2000 (IWM) peaked on 06/22/15 at 129.10 and has been out of favor with investors. In November 2015, normally a seasonally favorable period, the IWM tried to rally but failed. Now a new development has taken place, IWM is showing strength.

Notice the two key weekly significant downtrends that have been broken from June 2015 (blue line) and another from November 2015 (purple line) on this latest rally from the February low. This is bullish.

IWM closed at 114.63 on 04/26/16 clearing its 50 week moving average (line not shown). Resistance is just above at 116.00. If IWM can get through resistance, a move toward the upper channel objective at 134.00 is possible.  If IWM pauses, on the other hand, then support is at 112.00.  A break below 112 would negate my short term bullish outlook and cause me to reevaluate.

The lower portion of the chart is the technical indicator MACD, (a momentum indicator). MACD has generated a buy from an oversold condition and is rising rapidly breaking the short term trend line (pink line). Momentum has been in a long term down trend since December 2013 (green line). If IWM keeps moving higher this downward trend in momentum will change and turn favorable. The best is yet to come!

Summing Up:

Our models remain on a buy and in the most bullish condition.  There is a lot of disbelief in the rally which is bullish. Tape action has been positive with market breadth strong, especially in the small and midcap sectors.

Financials have picked up their performance as well, all signs of a healthy market.  Defensive areas such as XLU and XLP have been losing momentum.  Technology was not acting very well, losing impetus before Apple’s disappointing earnings announcement.  This needs to be monitored to see if it is temporary or a warning sign for the future. Sector selection will be important. I am recommending watching the Russell 2000 (IWM) to see if it can break through resistance at 116.00. If so, 134.00 is possible.   A break below support at 112.00 would negate
my short term bullish outlook and cause me to reevaluate.  The stock market is moving into an unfavorable seasonal period over the next few months.  Review your investment portfolio, enjoy the ride now, however be ready with your exit strategy in case market weakness begins and the bears come out of hiding.

I would love to hear from you.  Please feel free to share your thoughts, comments or ask any question you might have.

Please call me at 1-516-829-6444 or email at bgortler@signalert.com.

*******Article in Systems and Forecasts April 28, 2016

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Disclaimer: 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.

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A new quarter, tax selling season is over, and the start of earning season has begun. What remains in investors’ minds is whether the market will move higher. Supporting the market is that historically April is a profitable month. Investors are rotating in and out of different sectors as the major averages have been consolidating near potential resistance areas the past few weeks. Out of favor sectors such as Materials (XLB), Gold (GLD), Silver (SLV), Emerging Markets (EEM) and Oil (USO) have been attracting money. These sectors all have more room to the upside. If the breakout materializes as I suspect, money will move out of the defensive sectors such as utilities (XLU) and Consumer Staples (XLP) next.

During the advance from the February low, down days have been contained. The major averages such as Dow, S&P 500 and the Nasdaq have worked off their overbought condition. Favorable tape action, low volatility, and strong market breadth all are very encouraging signs that the major market averages will move higher and resistance will be broken to the upside.

The bulls remain in control climbing the wall of worry.Key Points 041516 S&F Newsletter

Tape Action Clues To Monitor For Further Gains Ahead:

The financial sector to continue rising. Watch for additional strength in KRE and XLF. The ultimate would be if financials would be stronger than the S&P 500 (SPY). XLF previously paused at resistance at 22.60 (03/3/16 newsletter). As of 04/13/16, XLF is 22.93, looking like it’s ready to bust through resistance and test its next objective at 24.50.

The Nasdaq 100 (QQQ) is close to resistance at 111.00. Further gains lie ahead if penetrated. A good sign will be if the QQQ will lead the advance higher, and be stronger than the S&P 500 (SPY). Watch the QQQ/SPY ratio.

Crude oil and the energy sector stocks are stable. Watch the United States Oil Fund (USO) and the energy sector (XLE). The XLE is showing strength lately after recently breaking the weekly downtrend from September 2014. USO closed on 04/13/16 at 10.53. Support is at 9.00 and resistance at 10.80 followed by 11.42.

The Transportation Average (IYT) takes out 145.85, its 03/2/16 peak, confirming the Dow Jones Industrials high (DIA) on 04/13/16.

Continued strength in midcaps. (MDY) Short-term support is 259.00. Resistance is at 269.00. If the MDY breaks through resistance, upside projections to 280.00 could be a reality. The MDY/SPY weekly ratio broke the down trend confirming an increase in upside momentum. (See my article in the April 1st Systems and Forecasts newsletter).

New 52 week lows on the New York Stock Exchange Index remain low, presently at 2. Risk is minimal as long as the new 52-week lows stay below 25.

Overseas markets rise further supporting the U.S. Keep an eye on Emerging Markets (EEM), China (FXI) and Europe (IEV) as benchmarks. All three ETFs made higher highs on 04/13/16 than the previous high on 03/30/16.

Volume has been unconvincing, remaining light. An increase in trading volume on the New York Stock Exchange would fuel gains.

High yield bonds keep rising. Use ETFs HYG or JNK as a benchmark.

The Value Line Geometric Composite, an unweighted average of roughly 1700 U.S. stocks closed higher than 03/31/16. More stocks are participating in the advance as the rally is gaining steam.

Small caps are generating investors’ attention showing signs of leadership compared to the S&P 500 (SPY). This is bullish! Keep an eye out for more strength in the small caps (IWM).

Watch the last hour of trading. If the major indices close near the highs of their daily range consistently this would be bullish.

What Are The Charts Saying?

The SPDR S&P 500 (SPY) Weekly With Channel (Top) and 12-26 Week MACD (Bottom)

041216 Newsletter S&P 500

The top chart is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S. As of 04/12/16 its top 4 holdings in the S&P 500 were Apple Inc. (AAPL) 3.41%, Microsoft Corporation (MSFT) 2.40%, Exxon Mobil

Corporation (XOM), 1.95% and Johnson & Johnson (JNJ) 1.68%.

In the 03/17/16 issue I raised the question of whether a breakout or top was forming. The S&P moved in a tight range the past month, working off its overbought condition staying within the trading channel (pink lines). The S&P 500 (SPY) broke
above 204.00, a shorter term resistance area getting the bulls interested again. The SPY appears ready to break the down trendline from July 2015 and challenge resistance at 212.00 – 214.00 now. If resistance is penetrated, 228.00 is an upside objective.

The bottom half of the chart shows MACD, a measure of momentum, on a buy. Good news, the downtrend from May 2015 (purple line) has been broken, a bullish sign suggesting the SPY will get through overhead resistance sooner rather than later.

Summing Up: 

Sideways action appears to have ended. The stock market is gaining steam. A potential breakout to the upside is developing. Investors were excited when the S&P 500 (SPY) rose above 204.00. Our trading models remain in the most favorable condition. Watch for further clues by the market tape to give further confirmation that the S&P 500 (SPY) breaks out. A move above 208.00 followed by 212.00 and 214.00 will give an upside objective of 228.00. In case something
unforeseen happens, a break below 200.00 on the S&P 500 (SPY) would surprise me and change my optimistic bullish outlook for higher prices ahead.

I welcome you to call me with any comments, feedback or questions at 516.829.6444 or email bgortler@signalert.com.

*******Article in Systems and Forecasts April 14, 2016

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0317 S&P 500 Key PointsInvestors’ fears disappeared quickly when an appetite for bargain prices outweighed worrying about a potentially possible serious decline forthcoming. The stock market proceeded to rally broadly, very strong tape action with extraordinary breadth that has accompanied the rise which has not been seen for many years. If market breadth remains favorable (more net advances than declines consistently), then higher gains are likely. The S&P 500 (SPY) has gained 11% from its lows on 02/11/16.

The global markets also participated in the
advance. In particular, emerging markets are performing better. There has been an uptick in relative strength compared to the S&P 500, (EEM/SPY) after peaking 5 years ago. It’s still early to tell if this will be the time that another failure in strength takes place, which has been the case in the last few rally attempts, or if the emerging markets keep going, and potentially even lead the US market higher.

Investors have purchased securities that were very weak during the decline. Materials, financials, gold, silver, energy and international stocks have come alive, encouraging signs for further rise. Brazil (EWZ) is up 16%, (had been up 26%) Spain (EWP) Italy (EWI) and India (EWI) are all up over 9% in March. China (FXI), Emerging Markets (EEM), Russia (RSX), Germany (EWG) and Korea (EWY) are all up over 7% month to date (through 03/15/16).

Our models have steadily been improving, now positive (bullish), meaning most favorable, above-average profit potential with risk well below average.

The odds favor the U.S. market moving higher. However the advance might be ahead of itself and need more base building before they work their way higher. Also expect further sector rotation to be the focus in the next few weeks, with investors and institutions’ rebalancing their portfolios as the quarter comes to a close. The best type of market advance is the one that price makes higher highs and higher lows and price doesn’t give up much ground on declines, 1 or 2%, only minor pullbacks. A larger decline wouldn’t be encouraging. If overhead resistance is penetrated then a breakout to the upside would occur.

More time is needed to tell what the outcome will be.

The biggest concern to me is the technical damage that was done during the decline earlier in the year. Longer term monthly charts still remains front and center to my eyes with all the upside trend lines that were broken.

For example, Biotech, the Valueline Composite Geometric Average, and the weakening momentum warning of the S&P 500 QQQ/SPY ratio (see my article in the 02/18/16 newsletter) of the MACD of the RSI, all had disturbing trendline breaks.

Another question I keep asking now that the Dow and the S&P 500 (SPY) have had a slight penetration above their 200-day moving average is, will the bulls stay in control like they have the last few weeks, and the market break out to the upside, or will the bears will come out of hibernation and the rally will fail? Another important question “Was the latest rise from the February low a relief rally or something more?” Even with the all clear message from our models and the global markets participating in the advance, I am not totally convinced that the market is out of the woods yet. I would like to see the S&P 500 (SPY) fall no more than 2%, turn up and penetrate the overhead resistance for the charts to confirm the potential bullish outcome (see below) that could arise. If the market does fall further the S&P (SPY) needs to hold above 195.00.

What Are The Charts Saying?

The SPDR S&P 500 (SPY) Weekly With Channel (Top) and 12-26 Week MACD (Bottom)

spyweekly macd 031616

The top chart is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S. As of 01/05/16 its top 4 holdings in the S&P 500 were Apple Inc. (AAPL) 3.21%, Microsoft Corporation (MSFT) 2.39%, Exxon Mobil Corporation (XOM), 1.93% and General Electric (GE) 1.66%.

SPY was near its lower channel five weeks ago, successfully testing the August 24 and January 19th lows. The S&P 500 (SPY) recovered 11% moving through the middle channel with ease, and now could be ready to challenge the top of the channel. For the very short term, a break above 204.00 will get the bulls interested again and a break below 200.00 may bring out the sellers. A breakout would occur if the S&P 500 could get through the critical point of resistance between 212.00 and 214.00 giving a higher objective to 228.00. If the market stalls and turns down from here, then goes below the middle channel, this would not be a good sign. The fear is the pattern on the S&P 500 (SPY) might be a significant top formation spread over time that could have serious implications going forward. Potentially the lows would be tested and this time the decline could be worse, projecting down to 165.00. For now, the decline has been contained and I give the benefit of the doubt to the bulls. I will be watching closely the action of the S&P 500 (SPY) in case the bear comes out of hiding and once again takes charge.

The bottom half of the chart shows MACD, a measure of momentum. MACD, although on a buy, the downtrend from May 2015 remains in effect (orange line). A bullish sign would be if MACD keeps rising and the down trend is broken sooner rather than later, and goes above the November MACD highs. This would indicate that the SPY is gaining momentum and higher prices lie ahead.

In our 01/08/16 Systems and Forecasts newsletter when the market started to fall fast I raised the question, “Will the decline continue, or will the market turn up from here? “ I gave the following positive signs that could indicate the end of the decline.

  • Overseas markets start to rise. Keep an eye on Emerging Markets (EEM), China (FXI) and Europe (IEV) as benchmarks.
  • The Value Line Geometric Composite, an unweighted average of roughly 1700 U.S. stocks gains strength showing more broad participation than only a few stocks rising.
  • Firming action in Biotechnology (XBI) and the Financial Sector (XLF, KRE)
  • Apple starts to rise again (APPL).
  • High Yield Bonds stabilize. Use HYG or JNK as a benchmark.
  • Less intraday volatility. Watch to see if VIX moves lower and can get below 18.00.
  • Oil stabilizes and stops falling. Watch oil (USO) and the energy sector (XLE).
  • Small caps (IWM) stabilize, turn up and then gain in relative strength compared to the S&P 500 (SPY).
  • S&P 500 (SPY) moves above 195.00 and stays above.

All of the above criteria occurred and the stock market rose sharply. The S&P 500 (SPY) is overbought in the short term, not necessarily bearish. Now once again is another critical time for the market. The principles above are all viable guidelines to give further clues if the S&P 500 (SPY) will breakout to the upside or if a market top is forming.

Summing Up:

Our models are bullish, giving the all clear signal with above-average profit potential with risk well below average.

For the very short term, a break above 204.00 on the S&P 500 (SPY) will get the bulls interested again and a break below 200.00 may bring out the sellers. I recommend having an exit plan in case the bears come out of hiding and the S&P falls below 195.00. Watch to see if the S&P 500 (SPY) goes through resistance between 212.00 and 214.00, giving a higher objective to 228.00. The odds favor the bulls!

I welcome you to call to share your comments, feedback or questions at 516.829.6444 or email bgortler@signalert.com.

*******Article in Systems and Forecasts March 17, 2016

 

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“The market is about money … Money flows in and the market goes up, money flows out and the market goes down.” –Jesse Livermore

Only two weeks ago the S&P 500 was at the top of its trading range, the semiconductors were at their highs (05/29/15 newsletter) and the technology sector was looking like it was ready for an upside breakout. Instead, semiconductors fell, and the Nasdaq 100 (QQQ) was unable to rally and close above the key 112.50 level, and the stock market reversed lower. Tape action started to get worse with energy, emerging markets and internationals weakening. The transportation average (IYT) fell to a new yearly low, market breadth weakened and the market looked like a larger decline would begin. There was heavy selling in the bond market with the 20 Year Treasury Bond ETF (TLT) accelerating its decline to a low of 115.25 on 06/10/15, down almost 17% from its peak on 01/30/15 at 138.50, adding further pressure to US equities. A short term pull back followed, with the overall market becoming oversold.

The financial sector (XLF) held firm though the decline. Also, the Nasdaq 100 (QQQ) held above key support at 107.50 signaling buyers to step in. In two days of trading the S&P 500 and the Nasdaq 100 (QQQ) rallied and are now with only three percent from their highs. With the intermediate and long term chart stock market patterns having shown a loss of momentum for many months, I am reevaluating whether to change my bullish bias. However, I am going to hold my ground for the time being as long as the financial sector continues to be strong and the technology sector holds support.

What Are The Charts Saying?

Weekly SPDR Financial Select Sector SPDR (XLF) and RSI14 (Bottom)

010515 xlf rsi
The top portion of the chart above shows the weekly SPDR Financial Select Sector SPDR (XLF) that looks to mirror the behavior of the financial sector of the S&P 500 Index. The Index includes companies from commercial banks, capital markets, diversified financial services, insurance and real estate. The top five largest holdings as of 06/09/2015 are; Wells Fargo & Co (WFC) 8.73%, Berkshire Hathaway (BRK.b) 8.36%, JP Morgan Chase & Co (JPM) 8.23%, Bank of America Corp (BAC) and Citigroup (C) 5.58%, representing 36.88% of the ETF. All the top holdings are at new yearly highs except Berkshire Hathaway which has been under pressure in recent weeks and is down 6.3% making a new yearly low on 6/9/15.

XLF has been in an uptrend since May 2012 and has now broken its short term trading range on 05/11/15. XLF paused for two weeks not giving up much ground retracing to 24.50, and then on 06/10/15 XLF made a new yearly high. The financial sector is looking strong, appearing to have broken out to the upside with further gains to go. This historically tends to be bullish for the market overall. The upside channel objective is at 26.00. If the XLF can break above then higher projections to 28.00 are possible. If XLF fails and goes below 24.00 there is a good chance the overall market will fall.

The bottom half of the chart shows The Relative Strength Index, a measure of momentum developed by Welles Wilder. RSI is based on the ratio of upward price changes to downward price changes over the last 14 weeks. RSI has broken the down trend (pink line), indicating that XLF is gaining momentum and is likely to continue on the same trend.

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

061015 xlfspy

The top part of the chart is the weekly XLF/SPY ratio. A rising line means the XLF is stronger, and if falling, the S&P 500 is stronger. The line is rising sharply showing the strength in the XLF vs. the S&P. It’s bullish that the weekly ratio is at its high for the year, confirming the XLF price high.

The lower chart shows the RSI of the XLF/SPY ratio, also in favorable position breaking its downtrend from 2014, and rising to a new high for the year. This shows increasing momentum which is bullish and likely to continue.

Just To Sum Up:

The future of the stock and bond market with the potential of higher interest rates ahead continues to spook the market and has caused the S&P 500 to be in a tight trading range so far in 2015. The selling pressure in both the stock and bond market appears to have subsided but the jury is still out if the S&P 500 (SPY) will have enough strength to break out of its trading range. For the advance to broaden and gain momentum look for further strength in the financial sector (XLF) to rise to 26.00, and for the Nasdaq 100 (QQQ) to close above 112.50 for two days. In addition, if the 20 Year Treasury Bond ETF (TLT) stabilizes there will be a buying opportunity for interest rate sensitive stocks which have been under heavy selling pressure this year. A break below 114.00 in TLT would not be a good sign for the bond market and interest sensitive stocks. As long as XLF doesn’t fall below 24.00 and QQQ is above 107.50, look for higher prices in the stock market.

I would love to hear from you! Any thoughts, questions comments, feedback; please call me at 1-844829-6229 or

email at bgortler@signalert.com

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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

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