There's A Bull-Bear Tug-Of-War Between The Nasdaq 100 ETF And Diamonds, Spiders, Transports And Small Caps

Summary

• The Nasdaq 100 ETF failed to breakout to the upside on Tuesday, Feb. 27 providing a technical warning.
• The QQQ ended the week with a positive weekly chart.
• Diamonds, Spiders, QQQ, Transports and Small Cap ETFs ended the week with negative weekly charts.
• I believe that QQQ will lose the tug-of-war and you can blame it on the Federal Reserve.

Technology leadership failed on Feb. 27 as the Nasdaq 100 QQQ could not trade to a new all-time high. On this date, investors heard comments from our new Fed Chairman Jerome Powell, who was testifying before the Committee on Financial Services, U.S. House of Representatives.

The Nasdaq 100 QQQ traded as high as $170.73 as the Fed Chief spoke, which was just below the all-time intraday high of $170.95 set on Jan. 26. After digesting the testimony, traders and investors became concerned that the FOMC was hell-bent on raising rates and unwinding the Fed’s huge balance sheet.

In my opinion, taking the balance sheet from $4.4 trillion to $4 trillion by the end of 2018, then to as low as $2 trillion in four years is like flushing $2.4 trillion down the toilet when these funds could be channeled by the U.S. Treasury to fund the Federal Financing Bank and convert some borrowing to infrastructure bonds targeted to savors on Main Street.

Because of the market turnaround on Feb. 27, the Nasdaq 100 shares ended that day with a ‘key reversal’ where the close that day of $168.21 was below the Feb. 26 low of $168.82.

Friday’s rebound resulted in a technical tug-of-war as QQQ has a positive weekly chart while the other four have negative weekly charts.

The Scorecard For These Equity ETFs

SPDR Dow Jones Industrial Average ETF (DIA)

Courtesy of MetaStock Xenith

The weekly chart for Diamonds ($245.42 on March 2) is negative with the ETF below its five-week modified moving average of $250.22. The 12x3x3 weekly slow stochastic reading ended last week at 59.90, down from 64.50 on Feb. 23.

Given this chart and my analysis, buy weakness to my semiannual value level of $230.11. My annual and quarterly pivots have been magnets this week at $246.52 and $242.48, respectively. The $242.48 level held at Friday’s low. Reduce holdings on strength to weekly and monthly risky levels of $253.26 and $264.04, respectively, which are below the all-time high of $265.93.

SPDR S&P 500 ETF Trust (SPY)

Courtesy of MetaStock Xenith

The weekly chart for Spiders ($269.29 on March 2) is negative with the ETF below its five-week modified moving average of $271.77. The 12x3x3 weekly slow stochastic reading ended last week at 62.58, down from 64.96 on Feb. 23.

Given my analysis, buy weakness to the 200-day simple moving average, which is rising each day and is now $255.90. The ETF held my semiannual and quarterly pivots of $264.10 and $266.66, respectively, last week. Reduce holdings on strength to my weekly, annual and monthly risky levels of $274.99, $276.34 and $282.58, which are below the Jan. 26 high of $286.62.

PowerShares QQQ Trust ETF (QQQ)

Courtesy of MetaStock Xenith

The weekly chart for QQQ ($165.99 on March 2) is positive with the ETF above its five-week modified moving average of $163.70. The 12x3x3 weekly stochastic reading ended last week at 72.85, up from 70.27 on Feb. 23.

Given this chart and my analysis, buy weakness to my quarterly value level of $150.56, which held at the Feb. 9 low. My annual and semiannual pivots are $156.14 and $154.54, respectively. Reduce holdings on strength to my weekly and monthly risky levels of $168.65 and $173.86, which straddles the all-time high of $170.95.

iShares Transportation Average ETF (IYT)

Courtesy of MetaStock Xenith

The weekly chart for the Transportation Sector ETF ($186.72 on March 2) is negative with the ETF below its five-week modified moving average of $190.40. The 12x3x3 weekly slow stochastic reading ended the week at 54.45, down from 59.90 on Feb. 23.

Given my analysis, buy weakness to the 200-day simple moving average which is rising at $177.85. My semiannual pivot remains at $188.79. Reduce holdings on strength to my monthly, quarterly and annual risky levels of $191.65, $194.69, and $204.61, respectively, which are all well below the all-time high of $206.73.

iShares Russell 2000 ETF (IWM)

Courtesy of MetaStock Xenith

The weekly chart for the small cap ETF ($152.35 on March 2) is negative with the ETF below its five-week modified moving average of $153.24. The 12x3x3 weekly slow stochastic reading ended last week at 50.46, down from 61.11 on Feb. 23.

Given this chart and my analysis, buy weakness to my semiannual value level of $144.99; this was tested at the Feb. 9 low of $142.50. Reduce holdings on strength to my monthly, quarterly and annual risky levels of $157.27, $157.64 and $165.04, respectively, versus the all-time high of $160.62.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[xpan]

No matter what the new Fed chair said, the truth is, the Fed will only react to the data. It all comes down to the inflation expectation. Then just at a critical time like this, here came the tariffs, which have the potential to make the inflation soar, a game change. People need to understand that it's the globalization and tech innovation that have kept the inflation low and the expansion well and alive after so many years. Never under-estimate what a president can do to the economy and the market.