Charts Worth Watching: amat, amln, apa, genz,
hal, IWM, lltc, nvls, oih, QQQQ, slb, smh, SPY
I am on the road and today's commentary is abbreviated. There is no video. Normal commentary and video will resume next Tuesday.
The next update will be Tuesday (June 2nd) by 9AM ET.
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While I still have my doubts on the sustainability of the current rally or even a consolidation breakout, the bulls simply refuse to budge and the major index ETFs remain strong, especially QQQQ. It remains a tricky time for trading as SPY oscillates within a flag/wedge consolidation and IWM bounces around within a pennant consolidation. QQQQ formed a pennant over the last 2-3 weeks and is challenging pennant resistance with a strong close on Thursday. Breakouts from these consolidations would signal a continuation higher and the market could pop for another few points.
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The noose is tightening as the Biotech iShares (IBB) consolidate with a triangle formation. After a sharp decline in late February, IBB rebounded with a bounce in March and then a triangle consolidation in April-May. Volatility is contracting as boundaries narrow (think Bollinger Bands). A breakout is imminent - but which way? A move above 68 would trigger a bullish breakout and target further strength towards the next resistance zone around 74-75. Failure at current resistance and a support break would be bearish. The bottom indicator shows the Commodity Channel Index (CCI) holding above the zero line for the most part. Positive readings in CCI indicate that the cup is half full. A CCI dip below the May lows would turn momentum bearish. Within the biotech group, I singled out Genzyme (GNEZ) with a falling flag and Amylin (AMLN) with a triangle.
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The Semiconductors HOLDRS (SMH) is showing signs of life and this could be positive for the tech sector. By extension, strength in semis could also provide a boost for the Nasdaq and the broader market. SMH broke resistance in March and broken resistance turned into support around 19. With a bounce over the last two weeks, SMH recaptured its 200-day moving average and shows some relative strength. This move reinforces support around 19 and the bulls have the edge as long as the May lows hold. Within the group, Applied Materials (AMAT) is getting a bounce off broken resistance with good volume two days ago. Novellus (NVLS) is trading within a consolidation and Linear Tech (LLTC) broke falling wedge resistance with a gap/surge last week.
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In yesterday's Market Message, I pointed out strength in the Oil Service HOLDRs (OIH) and the US Oil Fund ETF (USO). OIH broke resistance in April and surged above 100 in May. A pennant consolidation formed over the last 2-3 week and the ETF is challenging pennant resistance with a strong move on Thursday. Within the group, Schlumberger (SLB) broke flag resistance with a surge on the best volume in two weeks. Halliburton (HAL) broke resistance in early May and then formed a falling flag/wedge over the last two weeks. Apache (APA), which is not part of OIH, but part of the energy sector, surged above 85 in May and then formed a falling flag/wedge the last two weeks.
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