Before we look at the important levels on the daily charts we have mixed profiles for the weekly charts.
- Diamonds, Spiders and Nasdaq 100 QQQs still have negative weekly charts.
- The Transportation and Russell 2000 ETFs now have positive weekly charts.
- Strength this week can make all five positive, while weakness can make all five negative.
The bulls say that leadership from transports and small caps is positive for the overall market. Not so fast, look at the semiconductors as the more important economic tell!
A better economic gauge is the Philadelphia Semiconductor Index which ended last week with a negative weekly chart.
Almost every product we buy from refrigerators to handheld devices contains computer chips. The SOX is in correction territory, 13.2% below its all-time high set on March 13.
Other warnings among key markets:
- The Federal Reserve is raising rates and continues to unwind its balance sheet. In the fourth quarter of 2017, the Fed destroyed $30 billion in Treasuries and Mortgages. This grew to $60 billion in the first quarter of 2018. In April alone, $30 billion will be flushed down the toilet. Stocks rallied during quantitative easing and the S&P 500 peaked on Jan. 26 as unwinding began to accelerate.
- Stocks have been strong given a weak dollar and corporations were able to convert sales in foreign currencies into more dollars at home. The dollar bottomed on Jan. 25 as the S&P peaked.
- Commodities are on the rise as is crude oil, which raises prices at the gas pumps which is a tax on consumers. Note that the consumer staples ETF set its 2018 low on Friday.
The daily charts for the five equity ETFs show different dynamics but I note the ‘power of the pivots’.
Today’s Equity ETF Scorecard
SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)
The daily chart for Diamonds ($244.48 on April 20) shows how my annual pivot of $246.52 has been a magnet since Feb. 5.
Traders should buy weakness to my semiannual value level of $230.11 and reduce holdings on strength to my quarterly and monthly risky levels of $252.89 and $261.66, respectively. These levels are below the all-time intraday high of $265.93 set on Jan. 26.
SPDR S&P 500 ETF Trust (NYSEARCA:SPY)
The daily chart for Spiders ($266.61 on April 20) shows my semiannual pivot of $264.10 since Feb. 5. My annual pivot of $276.34 failed to hold Feb. 2 and was re-tested at the March 13 high as ‘the power of the pivot’. March 13 was a negative ‘key reversal’ day for SPY as the close that day was below the March 12 low.
Traders should continue to buy weakness to the 200-day simple moving average at $260.25. This average was successfully tested back on Feb. 9 when the average was $253.67. Traders should ‘sell strength’ to reduce holdings at my annual, quarterly and monthly risky levels are $276.34, $276.99 and $279.36, respectively. These levels are below the all-time intraday high of $286.62 set on Jan. 26.
PowerShares QQQ Trust ETF (NASDAQ:QQQ)
The daily chart for QQQ’s ($162.30 at April 20) shows how my zone of annual and semiannual pivots of $156.14 and $154.54 has been magnets since Feb. 8.
Traders should continue to buy weakness to my semiannual and annual pivots of $156.14 and $154.54, respectively, and reduce holdings on strength to my quarterly and monthly risky levels of $165.51 and $170.45, respectively.
iShares Transportation Average ETF (NYSEARCA:IYT)
The daily chart for the Transportation Sector ETF ($190.19 on April 20) shows the ETF between my semiannual and quarterly pivots of $188.79 and $195.90, respectively, where to $188.79 level has been a magnet since Feb. 5.
Traders should buy weakness to the 200-day simple moving average of $181.38 and reduce holdings on strength to my quarterly, monthly and annual risky levels of $195.90 and $204.61, respectively. These levels are below the Jan. 16 all-time intraday high of $206.73.
iShares Russell 2000 ETF (NYSEARCA:IWM)
The daily chart for the small caps ETF ($155.55 on April 20) shows the ETF tested my semiannual value level of $114.99 back on Feb. 6 and Feb. 9.
Traders should continue to buy weakness to my semiannual value level of $144.99 and to ‘sell strength’ to reduce holdings on strength to my monthly risky level of $159.30. The all-time intraday high is $160.62 set on Jan. 24.
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.