MARKET GAUGE: Confirmed Uptrend
*Weekly Sector Watch highlights several industry groups that have experienced a measurable change in strength or weakness relative to other groups over the last 3-6 week period.
SECTORS EXHIBITING RECENT STRENGTH: Transportation (Air Freight), Transportation (Ship), Retail/Wholesale (Auto Parts), Metal (Proc./Fabrication), Finance (Consumer Loans), Medical (Products), Software (Medical), Real Estate (Development/Ops).
SECTORS EXHIBITING RECENT WEAKNESS: Computer (Data Storage), Computer (Networking), Telecom (Fiber Optics), Telecom (Infrastructure), Consumer Products (Electronics), Retail (Electronics), Energy (Solar).
OVERVIEW: With most people enjoying their long holiday weekend I will keep the review brief. The indices pretty much ran in place this week marking some more time. This passage of time did aid the indices as they lost some distribution days giving them an improved look, at least in this category. The Nasdaq Composite and Nasdaq 100 did both manage gains of more than 1% as the S&P 500 and Russell 2000 remained pretty much unchanged. However, there were some important technical levels successfully tested this past week in the Russell 2000 and Nasdaq 100, so let’s get right to the charts and take a look.
SPY- The 4/20 distribution day came off the books this week in the S&P 500 ETF pairing the total down to five days over the last 25 sessions. The total had reached a high of seven days, so this remains a positive development for the index. Things can improve further in this regard early next week as the 4/24 day will also evaporate from the count due to time. Remember, distribution days that date back more than five weeks become much less relevant in terms institutional distribution. The index ETF has been able to hold support near that $270-$271 level we have discussed here at length, but has been unable to pull away to the upside thus far keeping the mood a bit tenuous. With the 50 day EMA now regaining its upward trajectory, we can look to that area for support going forward should the index back up. The ETF looks like it has set up a congestion zone between $270 and $275, and although Fridays action was fairly quiet heading into the three day weekend, perhaps things are set to pick up next week giving us a resolution one way or the other out of this price zone.
NASDAQ- The Nasdaq Composite continues to paint a better picture than the S&P 500 as it sits less than 3% from its all-time highs with only three distribution days on the books. The index has held the key 7300 level above the April highs and the 50 day EMA has turned higher here as well. Any advance from here may be met with some tough resistance near 7500, a big round number that sits just below the old highs set in March near 7637.
QQQ- The Nasdaq 100 is pretty much a carbon copy of the Composite. The index flashed a positive sign by printing a bullish candle on Wednesday that bounced off recent support near $167 with the index finishing at the highs of the day on increased volume over Tuesdays session. The index does have a challenge sitting just above with resistance near $171. Beyond that the old highs await near $175. It too sits with only three distribution days in the current count.
IWM- The Russell 2000 continues to be the leader in the clubhouse. We mentioned in last weeks prep that the index was getting extended in the near term and a test of the breakout level may be in the cards. Well the index did indeed pullback, and on Thursday it tested the top of the breakout level. So far the index has passed the test, but we are not in the clear yet as we would still like to see the index pull away from the top of its base convincingly. Due to the passage of time the index has cleared itself of all distribution days presenting a picture of health in this regard.
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