There are some minor divergences brewing, but the overall picture remains positive for stocks. The market is clearly strong as four of the five major index ETFs surged to new highs this week. The Dow SPDR (DIA) is the lone laggard because it remains below its September high. Breadth remains strong with the Nasdaq AD Line hitting a new high and the NYSE AD Line challenging its summer high. Sector leadership is coming from the Consumer Discretionary SPDR (XLY) and Finance SPDR (XLF) as both hit new highs this week.
- AD Lines: Bullish. The Nasdaq AD Line hit a new high in mid October and remains in a strong uptrend. The NYSE AD Line is now near its summer highs and remains in an uptrend.
- AD Volume Lines: Bullish. The Nasdaq AD Volume Line is near its early October high and in an uptrend. The NYSE AD Volume Line is also in an uptrend, but remains just shy of its prior high and has yet to confirm the new high in the NY Composite.
- Net New Highs: Bullish. Net New Highs on both the Nasdaq and the NYSE surged this week and the cumulative High-Low Lines moved to new highs.
- Bullish Percent Indices: Bullish. All nine sector Bullish Percent Indices are above 50%.
- VIX/VXN: Bullish. The S&P 500 Volatility Index ($VIX) and the Nasdaq 100 Volatility Index ($VXN) ultimately failed near their 2013 highs and fell sharply the last six days.
- Trend-Structure: Bullish. SPY, MDY, IWM and QQQ hit new highs in mid October. DIA remains below its September high and is lagging because of weakness in IBM.
- SPY Momentum: Bullish. RSI bounced off the 40-50 zone last week, and MACD (5,35,5) turned up near the zero line. The Aroon Oscillator turned up, but has yet to exceed +50 to turn bullish again. Two of the three are bullish though.
- Offensive Sector Performance: Bullish. XLF and XLY recorded new highs this week. XLK is near its September high, but XLI remains below this high and shows some relative weakness.
- Nasdaq Performance: Bullish. The $COMPQ:$NYA ratio is in an uptrend, but remains below its early October high as the Nasdaq lagged a little over the last two weeks.
- Small-cap Performance: Bullish. The $RUT:$OEX ratio is in an uptrend, but remains below its early October high as small-caps lagged a little over the last two weeks.
- Breadth charts (here) and intermarket charts (here) have been updated.
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is
not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise).
We all need to think for ourselves when it comes to trading our own accounts. First, it is
the only way to really learn. Second, we are the only ones responsible for our decisions.
Think of these charts as food for further analysis. Before making a trade, it is important
to have a plan. Plan the trade and trade the plan. Among other things, this includes setting
a trigger level, a target area and a stop-loss level. It is also important to plan for three
possible price movements: advance, decline or sideways. Have a plan for all three scenarios
BEFORE making the trade. Consider possible holding times. And finally, look at overall market
conditions and sector/industry performance.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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