Here are a few weekly charts of some of the key sector ETFs. The following ETF’s are posted in this order below: XLK (technology); XLP (consumer staples); XLE (energy); XLF (financials); XLB (materials)
I have put together an updated video overview of the top 10 components in the Nasdaq 100 Index ($NDX). Remember, the top 10 components comprise over 50% of the weighting of this key index of 100 stocks. Therefore, in order to help get a read on where the overall market might be headed, it would behoove us to key an eye on these 10 key stocks.
In this video, I take a look at how the charts have played out since the last $NDX Top 10 Holdings video from Sept 26th in order to determine what has, and more importantly what has not changed from a technical perspective since then.
Although I had planned to get “back into things” over the weekend, I ended up extending my vacation until the last minute of the last day. As I was pretty much checked out mentally from the markets over the last few weeks, just checking in occasionally, I am now ready to “re-engage” the markets with my full attention and plan to update the trade ideas as well as post some new commentary and charts this week.
It seems that the markets caught the majority of traders and investors, myself included, off-guard over the holidays with the largest two-day point rally ever for the last & first day of the year. For those who were bullish and positioned as such to take advantage, congratulations. For those like myself, who were positioned short and still are, I plan to update as many of the active short trades as possible over the next few days as well as communicate my thoughts on where we might go from here.
The bottom line is that the longer-term charts and several other near-term metrics such as sentiment, overbought readings, etc.. continue to remain bearish while the current near-term and intermediate-term price trend clearly remains bullish. Although I can not give investment advice, I can & will share my general thoughts on positioning here: For those current long who still believe there is more upside to come, at least consider raising or trailing your stops to protect profits. For those in cash looking to get long, I can only say that the risk to reward ratio is very poor right now. Although the near-term trend and price action is bullish, the majority of sectors and broad indices are at or approaching very significant resistance levels on the longer-term charts and overbought to boot.
For those short or looking to get short, the markets are at or very near key resistance levels and shorting resistance with stops above is more often than not a successful strategy (just like buying support with stops below). I continue to be very liberal with my stops and believe that the R/R of being short here with stops not too far above (roughly 3-5% on the major indexes) is very favorable. Regardless of the recent plunge in the $VIX during the 12/31 & 1/2 rallies, I still think that the $VIX calls are very attractively valued based for those looking for a hedge against long positions or as a speculative short trade. Finally, I do plan to add any attractive long trade setups that I come across when looking over the charts this week. For those of you who have followed this site for most of 2012 know, I have typically kept a nice balance of long and short trade ideas on the site, regardless of my own positioning or market bias. I hope you enjoyed the holiday season and once again I’d like to wish everyone a happy & prosperous New Year. More charts & commentary to follow shortly.
The CS long has hit and exceeded T4 and although I had T5 listed as the final target, I am going to removed the trade early here at 25.57 and move CS to the completed trades category. Although T5 is possible over time, there are now significant negative divergences in place on the daily time frame and due to the large gains on this trade, I no longer believe the R/R warrants remaining long at this point. Charts in order as posted:
There are also several short trades that have exceeded their suggest stop parameters recently. I plan to update the Short Trade Ideas over the weekend and will list all completed trades (stopped out or profit targets hit) as well as add any new trades then.
the DSX long has hit both T1 & T2 (final target) today for an 18.1% gain. it took a while as this trade officially triggered a long entry on the breakout back on Sept 19th (at 7.18) and just floundered around since then, above the suggested stop levels, finally moving up sharply with the other shipping stocks recently. as T2 was the final target, DSX will be moved to the completed trades category. however, for longer-term traders & investors who are bullish on the stock or shipping sector, the next unofficial target is that horizontal line at the 10.30 area. consider raising stops to just below the former T1 area if holding out for additional gains. charts in order as posted.
Here’s a look at AAPL on various time-frames from the weekly chart down to the 60 minute chart. The 500 level remains critical support although 490 is my official number (to allow a small margin of error for any brief spikes below 500 intended to run the stops on longs and suck in some shorts on a possible bear-trap). AAPL recently managed to regain that multi-year uptrend line on the daily & 2-day period charts during the 12/31- 1/2 rally but has fallen back below that level today. However, the 490-500 area remains critical support and for now, the stock remains comfortable above that level although AAPL has significantly lagged behind the broad market on the rally off the Nov 19th lows. Also note the bearish posture of AAPL below the key 200 & 50 day exponential moving averages (and the 40 period ema on the weekly chart).
As a follow-up to the $RUT weekly chart posted yesterday, here’s my interpretation of the IWM daily chart. The $RUT/IWM has been one of the strongest indexes over the last 6 weeks, retracing a full 100% of it’s Sept 14 – Nov 16th drop. All-in-all, unmistakably bullish price action. However, I call ‘em like I see ‘em, right or wrong & here’s what stands out to me when I look at the IWM daily chart:
- Double negative divergences now in place (as prices are now slightly above the 9/16 high) while both the MACD and RSI made lower highs. This follows the even larger divergences leading up to the previous highs on 9/16.
- Prices up against all-time high resistance. This is the third attempt at the 87 area on the IWM (approx. 870 on the $RUT) over the last two years. Although a solid breakout above that level would be bullish, the current overbought condition of the RUT/IWM makes any near-term breakout unlikely to stick. Ideally for the longer-term bullish case, the $RUT would consolidate for a few weeks before attempting a breakout of this level. Another bullish option would be a breakout soon with prices coming back to retest the 870 area with a decent consolidation there before powering higher.
- As with the weekly $RUT chart posted yesterday, prices are also backtesting a recently broken uptrend line.
- Finally, note the unusually large volume spike on the move into resistance yesterday. As the chart below illustrates, such volume spikes in the past were typically the result of a buying or selling climax.
Basically, the $RUT/IWM is at an important technical juncture. Any significant move higher will break out the index to new all-time highs (I’m not concerned with a few points here or there on a nearly 900 point index) while also likely negating, or undoing, the negative divergences that remain in place on both the daily and weekly time frames. Such an event would clearly be bullish, especially if accompanied on above average volume. As mentioned yesterday, we’d also need to see the more widely followed indices like the $SPX, $NDX, $COMPQ, etc.. to confirm by also breaking above their 2012 highs. While the $SPX is getting close, the $NDX & $COMPQ still have quite a bit of work to do.
As I’m winding down my vacation, I plan to sit down over the weekend and do a comprehensive look at the charts. I also plan to update the trade ideas by removing any completed trades as well as adding any new trade ideas that I come across. Once again, I hope that you enjoyed the holiday season and I want to wish a very Happy New Year to all!!!