Seeking Alpha

The 5 Equity ETFs Have Negative Weekly Charts As Transports And Russell 2000 Set Fresh 2018 Lows

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Includes: DIA, IWM, IYT, QQQ, SPY
by: Richard Suttmeier
Summary

The Diamonds ETF ended last week below my semiannual pivot at $243.29 as a “death cross” looms.

The Spiders ETF ended last week well below my semiannual pivot of $270.84 as a “death cross” formed on Dec. 7.

The NASDAQ 100 QQQ ETF remains above my annual value level at $156.14 but a “death cross” was confirmed on Dec. 4.

The Transports ETF is well below my semiannual pivot at $181.19 and set a fresh 2018 low of $171.32 on Friday.

The Russell 200 ETF is well below its “death cross” confirmed on Nov. 13 and set a new 2018 low of $140.10 on Friday.

I will show the daily charts today as all five equity ETFs now have negative weekly charts.

A negative weekly chart occurs when an ETF is below its five-week modified moving average with a declining reading in its 12x3x3 weekly slow stochastic.

The main reason I have been tracking the formation of a bear market in 2018 is the unwinding of the Federal Reserve balance sheet. As of Dec. 12, the Fed balance sheet is at $4.088 trillion, down $412 billion since the end of September 2017 when it was $4.5 trillion. The Fed is expected to drain another $50 billion in December. Then in 2019 and 2020, the Fed is expected to drain $50 billion a month, a total of another $1.2 trillion.

As a result of this growing strain on the banking system, the major banks are falling into bear market territory. I have always opined that you cannot have a bull market in stocks with a bear market for financials. Keep in mind that the big banks have tentacles around the globe which makes them vulnerable for defaults as debts become more difficult to refinance.

Here’s Today’s Scorecard

Scorecard For The 5 Equity ETFs

SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Daily Chart For DIA Courtesy of MetaStock Xenith

The weekly chart for Diamonds remains negative with the ETF below its five-week modified moving average at $249.71. The 12x3x3 weekly slow stochastic reading ended last week at 30.77, down from 34.39 on Dec. 7.

The daily chart shows that Diamonds ended last week below its 200-day and 50-day simple moving averages which are converging at $252.33 and $250.87, respectively, and a “death cross” will likely be confirmed this week when the 50-day slides below the 200-day to indicate that lower prices lie ahead. The ETF is below my annual and semiannual pivots at $246.52 and $243.29, respectively, which are horizontal lines on the chart. DIA set its all-time intraday high of $269.28 on Oct. 3 and is in correction territory 10.4% below that level.

SPDR S&P 500 Trust ETF (NYSEARCA:SPY)

Daily Chart For SPY Courtesy of MetaStock Xenith

The weekly chart for the Spiders remains negative with the ETF below its five-week modified moving average of $270.08. The 12x3x3 weekly slow stochastic reading slipped to 27.89 last week, down from 31.40 on Dec. 7.

The daily chart shows that Spiders has been under a “death cross” since Dec. 7 with the 50-day and 200-day SMAs at $272.74 and $275.68, respectively. The ETF is below three chart horizontals; my semiannual pivot at $270.84, my annual pivot of $276.34 and my monthly risky level at $290.41. SPY set its all-time intraday high of $293.94 on Sept. 21 and is in correction territory 11.4% below that level.

Invesco QQQ ETF (NASDAQ:QQQ)

Daily Chart For QQQ Courtesy of MetaStock Xenith

The weekly chart for the QQQ ETF remains negative with the ETF below its five-week modified moving average at $166.86. The 12x3x3 weekly slow stochastic reading declined to 25.06 last week, down from 26.39 on Dec. 7.

The daily chart for QQQs shows the formation of a “death cross” on Dec. 3 with the 50-day SMA below the 200-day SMA now at $169.05 and $172.38, respectively. The ETF is above my annual value level at $156.14 with my semiannual pivot of $169.40 and my monthly risky level at $186.56. QQQ set its all-time intraday high of $187.53 on Oct. 1 and is in correction territory 14.1% below this level.

iShares Transportation Average ETF (NYSEARCA:IYT)

Daily Chart For IYT Courtesy of MetaStock Xenith

The weekly chart for the Transports ETF remains negative with the ETF below its five-week modified moving average at $185.72 with its 12x3x3 weekly slow stochastic reading sliding to 33.11 last week, down from 37.77 on Dec. 7. Transports declined so violently that there is risk to its 200-week simple moving average or “reversion to the mean” at $163.88.

The daily chart for IYT shows the formation of a “death cross” on Nov. 26 with the 50-day and 200-day SMAs now at $187.59 and $193.09, respectively. The ETF is below my semiannual pivot at $181.19 and my monthly and annual risky levels at $201.73 and $204.61, respectively. The Transports ETF set its all-time intraday high of $209.43 on Sept. 14 and is deep into correction territory 18% below this level.

iShares Russell 2000 ETF (NYSEARCA:IWM)

Daily Chart For IWM Courtesy of MetaStock Xenith

The weekly chart for the Russell 2000 ETF is now negative but oversold with the ETF below its five-week modified moving average of $149.96 and with its 12x3x3 weekly slow stochastic reading declining to 17.58, down from 20.80 on Dec. 7, falling below the oversold threshold of 20.00. The Russell 2000 has been the downside leader and there is risk to its 200-week simple moving average or “reversion to the mean” at $134.52.

The daily chart for IWM was the first to give a “death cross” warning back on Nov. 13 with the 50-day and 200-day SMAs now at $151.57 and $160.26, respectively. This ETF is below my semiannual pivot at $154.05 and my annual risky level at $165.04. This ETF set its all-time intraday high of $173.39 on Aug. 31 and is deep into correction territory 18.9% below the high.

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.