Yesterday’s advance in the S&P 500 put the index at a new closing high for the year, which is a great sign considering where this index was only six sessions ago! Turnover was lighter, on the NYSE but increased once again on the NASDAQ, as the tech heavy index continues to extend above the prior swing high.
SPDR S&P Retail ETF ($XRT) has formed a bullish, 11-week consolidation, with most of the action holding above the rising 10-week MA. Last week’s bullish reversal candle on a pick up in volume is a clear sign of support. We look for $XRT to breakout to new highs within the next few weeks.
After a 33% rally from its last base breakout at $15, Global X Social Media Index ETF ($SOCL), is now in base mode the past few weeks. The first pullback to the rising 10-week MA after a strong breakout is usually an area that is supported by institutions, and we clearly see that last week, as $SOCL dipped below the 10-week MA but closed back above it by the end of the week. The base looks like it needs a few more weeks of consolidation, which should hold above $19, minus a few shakeouts. We will continue to monitor the action for a low risk entry point off the 10-week MA.
On Friday, and once again on Monday, our remaining long position in First Trust ISE Revere Natural Gas ($FCG) hit its sell target of $19.70, locking in a 10.5% gain on the remaining shares. For those who are still long you can exit on tomorrow’s open. The chart below details our entry and exit prices.
Turnover was lighter once again, so technically the S&P 500 or NASDAQ has yet to produce an accumulation day. However, we noticed plenty of bullish reversal candles on the weekly charts of leading stocks and major averages. The weekly chart of the NASDAQ Composite below shows the bullish reversal action after an undercut of the uptrend line and 10-week MA. Thursday’s gap up was very strong, and probably left a ton of traders in the dust after getting stopped out earlier in the week.
The monthly chart of iShares Dow Jones US Telecom ($IYZ) below shows a recent breakout above a significant resistance level at $26 earlier this year. Since then, the price action has chopped around in a tight range above the prior highs of the last base. A breakout above the recent range could spark a rally to or near the pior highs of 2007, around the $32-33 area.
Guggenheim China Small Cap ETF ($HAO) has shown great relative strength as of late, breaking out above resistance at $25 while the S&P 500 pulled back 5% off a recent swing high. We like the bullish reversal candle last week, which opened below the prior week’s low and closed above the prior week’s high. The price closed near the dead highs of the week as well.
With the broad market averages in pullback mode, there isn’t much in the way of actionable setups on the ETF side. We continue to monitor the potential bullish reversal action in United States Natural Gas Fund ($UNG). $UNG undercut a prior swing low in August and formed a bullish reversal candle. Since then, the price action has traded in a tight range just below $20.
After failing to hold support at the 20-day EMA, iShares MSCI Japan Index ($EWJ) has pulled back to a key support level, where the downtrend line and 10-week MA converge at $11.50. $EWJ should hold above this downtrend line if it is going higher over the next few weeks, as a breakdown below the 10-week MA could result in a move to the 40-week MA, around $11.
A while back, we discussed a potential breakout in the Claymore/AlphaShares China Small Cap ETF ($HAO), as it bounced higher from a double bottom pattern with a slight undercut of the prior low on the weekly chart below. On Friday, $HAO cleared the highs of a three-week range on better than average volume, signaling the uptrend may be ready to resume after a nine month long consolidation.