ETF Market Trends: Momentum Begins to Run into Headwinds

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Includes: AGG, BBH, CEW, DIA, EEM, EWG, EWQ, EWS, EWT, EWU, EWX, EWY, FNIO, FXC, FXI, FXY, GLD, GMF, GUR, ICN, IEV, ITB, IWM, OIH, QQQ, REM, RSX, RTL-OLD, SMH, SPY, SWH, TIP, TLT, UNG, USO, VGK, VXX, XHB, XLF, XLK, XLP, XLU
by: J Clinton Hill

Market Summary: Dow -67.83 @ 9995.91; S&P 500 -8.88 @ 1087.68; Nasdaq -16.49 @ 2156.80; Russell 2000 -7.16 @ 616.18; U.S. Dollar +0.12 @ 75.62; Crude Oil +0.92 @ 78.70; CRB +2.38 @ 276.10; Gold +2.70 @ 1053.90; 10-Yr Treasury Yield -0.53 @ 34.17

Leading Industries on Surging Volume: Toy & Hobby Stores

Lagging Industries on Contracting Volume: Reit-Office; Reit-Residential; Small Tools & Accessories; Reit-Diversified Industrials; Computers Wholesale; Recreational Goods; Hospitals

Friday’s trading finished on a down note, but was not enough to derail momentum or prevent the major U.S. equity indexes from delivering 2 consecutive weeks of positive performance. Google (NASDAQ:GOOG), IBM, and GE exceeded earnings expectations while Bank of America (NYSE:BAC) failed to beat the street. On the economic front, industrial production and capacity utilization in September surpassed consensus estimates. Unfortunately, the U of M Consumer Confidence survey in October was weaker than expected.

Market momentum is beginning to run into headwinds as the percentages of stocks trading above key moving averages are showing patterns of decline. Market trends are still up and stocks are likely to move higher, but the S&P 500 is approaching its 50% Fibonacci retracement level at 1125 based upon its move from the October 2007 high to the March 2009 low. This is will be an important test and if successful, sets up the bulls for a campaign assault on the 61.8% retracement level at 1230-1235 levels. In the meantime, recent market action is creating the potential for the S&P 500 to pull back and test its newly established levels of support between 1040 and 1025.

Fundamentally the valuations make it difficult to justify a higher move in the market, but the outlook from some bellwether companies is improving. After reading the transcript of GE’s conference call, which is about as good an overview one can get on the broad economy given its conglomerate structure and massive footprint on the U.S. and global economy, while its weakest links remain GE Capital and the real estate portfolio, infrastructure backlogs and stimulus funds are likely to produce positive results down the road. Google, on the other hand, is actually walking the talk by seeking to boost its staff. A company hiring more employees is certainly new news these days. Lest we forget, Google, albeit a tech company, is umbilically tied to the advertising industry which is somewhat of a leading indicator itself. Since the last recession, a lot has changed in the field of advertising and the digital age of the internet has disrupted and destroyed many of its traditional business models. The jury is still out on this one and only time will tell.

At the end of the day, a lot depends upon Joe the Consumer, our true blue American and free-market capitalism’s long-time ally, who has yet to "rsvp" to the statistical economic recovery party. Sometimes, I wonder if Joe even got his invitation. My guess is that he is too hung over from his last credit binge, which reduced his life to such shambles, and too busy getting his house in order (no pun intended) to even consider a little bit of hair of the dog. In fact, the last I heard was that Joe has gone sober and committed to a 12 step program for credit addiction. Oh well…

Today’s Economic Events: Refer to U.S. Calendar or International Calendar

Today’s Postive & Negative Earnings Surprises: Refer to Hillbent’s earnings summary report for a detailed analysis of positive & negative earnings surprises

ETF Market Direction Trends: There are no signifiant changes to the ETF Market Trends table.

ETF Equity Index Performance Summary
DIA (DJ Industrials) -0.56%
SPY (S&P 500) -0.74%
QQQQ (Nasdaq 100) -0.65%
IWM (Russell 2000) -1.00%
ETF Sector Performance Summary
XLY (Consumer Discrtn) -0.25% XLI (Industrials) -0.70%
XLP (Consumer Staples) 0.61% XLB (Materials) -1.39%
XLE (Energy) -0.30% XLK (Technology) -0.94%
XLF (Financials) -2.37% IYZ (Telecom) -1.13%
XLV (Health Care) -0.14% XLU (Utilities) 0.34%

ETF 5 Day New Highs: U.S. Equities (XLP*, XLU, XLE*, RTH*, ITA, OIH*, SWH*, SEA, BBH); International Equities (EWU*, EWM*); Commodities (CRBQ; DBC, UGA*; USO); Forex (CEW*, FXB). (Note * denotes 250 day new high)

ETF 5 Day New Lows: U.S. Equities (NYSEARCA:SMH); International Equities (EWJ, EWY); Commodities (GLD, SLV); Forex (FXC, FXY); Bonds (EMB, MBB, SHY); Real Estate (BATS:REM). (Note * denotes 250 day new low)

No further comments this evening. Stay Hillbent for the Market Direction and ETF Market Trends™…

Key Pivot Areas for Support & Resistance Levels (on 10-16-2009)

ETF Index S3 S2 S1 Pivot R1 R2 R3
DIA 97.44 98.72 99.36 100.00 100.64 101.28 102.56
SPY 106.72 107.76 108.32 108.80 109.36 109.84 110.88
QQQQ 41.73 42.24 42.51 42.75 43.02 43.26 43.77
IWM 59.29 60.51 61.09 61.73 62.31 62.95 64.17
VXX 42.19 43.38 43.99 44.57 45.18 45.76 46.95

ETF Market Trends Monitor (10-16-2009)

U.S. Equity ETFs
Equity Indexes Short-term Intermediate Primary
DIA (DJ Industrials) up up up
SPY (S&P 500) up up up
QQQQ (Nasdaq 100) up up up
IWM (Russell 2000) up up up
VXX (Short-term VIX Futures) down down down
VXZ (Mid-term VIX Futures) down down down
Major Sectors Short-term Intermediate Primary
XLY (Consumer Discrtn) up up up
XLP (Consumer Staples) up up up
XLE (Energy) up up up
XLF (Financials) up up up
XLV (Health Care) up up up
XLI (Industrials) up up up
XLB (Materials) up up up
XLK (Technology) up up up
IYZ (Telecom) down up up
XLU (Utilities) up up up
Key Industries Short-term Intermediate Primary
ITA (Aerospace & Defense) up up up
BBH (Biotech) up up up
OIH (Oil Services) up up up
PPH (Pharmaceuticals) up up up
RKH (Regional Banks) up up up
RTH (Retail) up up up
SMH (Semiconductors) up up up
SWH (Software) up up up
SEA (Global Shipping) up up up
IYT (Transportation) up up up
International Equity ETFs
Americas Short-term Intermediate Primary
ISI (S&P 1500) up up up
EWC (MSCI Canada) up up up
EWW (MSCI Mexico) up up up
ILF (Latin America 40) up up up
EWZ( MSCI Brazil) up up up
Europe Short-term Intermediate Primary
EWU (MSCI United Kingdom) up up up
EWG (MSCI Germany) up up up
EWQ (MSCI France) up up up
RSX (Mkt Vectors Russia) up up up
VGK (Vanguard Europe) up up up
IEV (S&P Europe 350) up up up
Asian-Pacific Short-term Intermediate Primary
EWA (MSCI Australia) up up up
FXI (FTSE China) up up up
EWH (MSCI Hong Kong) up up up
IFN (India Fund) up up up
EWJ (MSCI Japan) down down up
EWS (MSCI Singapore) up up up
EWY (MSCI South Korea) down up up
EWT (MSCI Taiwan) up up up
IF (Indonesia Fund) up up up
EWM (MSCI Malaysia) up up up
VNM (Vietnam) up n/a n/a
Emerging Markets Short-term Intermediate Primary
EEM (MSCI Emerging Mkts) up up up
GMF (Emerging Asia Pacific) up up up
GUR (Emerging Europe) up up up
GML (Emerging Latin America) up up up
GAF (Middle East & Africa) up up up
EWX (Emerging Small Caps) up up up
Alternative Assets
Commodities Short-term Intermediate Primary
GLD (Gold) up up up
SLV (Silver) up up up
DBB (Base Metals) up up up
JJC (Copper) up up up
USO (Oil) up up up
UNG (Natural Gas) down down down
UGA (Gasoline) up up up
CRBQ (Global Commodities) up n/a n/a
DBC (Commodities) up up up
JJG (Grains) up up down
DBA (Agriculture) up up up
Forex Short-term Intermediate Primary
UUP (U.S. Dollar) down down down
FXE (Euro) up up up
FXY (Japanese Yen) down up up
FXF (Swiss Franc) up up up
FXB (British Pound) up up up
FXC (Canadian Dollar) up up up
FXA (Australian Dollar) up up up
FXM (Mexican Peso) up up up
BZF (Brazilian Real) up up up
CYB (Chinese Yuan) lateral lateral lateral
ICN (Indian Rupee) up up up
XRU (Russian Ruble) up up n/a
CEW (Emerging Currency) up up up
Bonds Short-term Intermediate Primary
SHY (1-3 Yr Tsy) down up down
IEF (7-10 Yr Tsy) down up down
TLT (20 Yr+ Tsy) down up down
TIP (Tsy Inflation Protect) up up up
AGG (Investment Grade) down up up
MBB (Mortgage Bonds) up up up
JNK (Hi Yld Bonds) up up up
HYG (Hi Yld Corp) up up up
WIP (Int’l Inflation Protect) up up up
EMB (Emerging Markets Bonds) up up up
MUB (Nat’l Muni Bond) down up up
Real Estate Short-term Intermediate Primary
IYR (DJ US Real Estate) down up up
ICF (Cohen & Steers) up up up
XHB (Homebuilders) up up up
ITB (Home Construction) up down up
FIO (Industrial Office) up up up
REM (Mortgage Reits) down down up
REZ (Residential Index) up up up
RTL (Retail Index) up up up

Market Momentum as of 10-16-2009 (% of Stocks > Moving Averages)

Market Momentum 20-Day MA 50-Day MA 200-Day MA
Today 65.50% 75.87% 91.32%
Yesterday 70.72% 78.64% 91.86%
Last Week 68.13% 80.08% 91.28%
Last Month 84.70% 87.09% 92.51%

Disclosures: Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.