The Bear Market Rally Continues As The 5 Equity ETFs Climb Risky Levels

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

The Diamonds ETF is above my semiannual pivot at $243.47 with its 200-day simple moving average at $249.77.

The Spiders ETF could not end last week above its semiannual pivot at $266.14 with its 200-day SMA at $273.87.

The QQQ ETF remains below my semiannual and annual risky levels at $167.53 and $169.27, respectively, and its 200-day SMA at $171.41.

The transports ETF remains well below its monthly risky level at 200-day SMA at $189.29 and $190.53, respectively.

The Russell 2000 ETF remains below all 2019 risky levels that begin with my semiannual risky level at $149.77.

Today, I show the daily charts with their key technical levels.

The Federal Reserve balance sheet remains a drag: As of Jan. 23, the balance sheet was marked at $4.047 trillion, down $453 billion since the end of September 2017 when it was $4.5 trillion. The first drain of 2019 was just $2 billion, the second was $6 billion and the latest was $3 billion. The total for January is now $11 billion. The FOMC may offer new unwinding guidance following Wednesday’s policy meeting.

My call for the FOMC: Look for the Federal Reserve to raise rates in June and December to end 2019 with a “normal” federal funds rate of 2.75% to 3.00%. The Fed balance sheet guidelines will be clarified on Jan. 30.

My market call: The bear market rally for stocks continues as all five equity ETFs now have positive weekly charts. Diamonds is above one pivot and Spiders tested one pivot. My higher levels remain risky levels at which to begin to reduce holdings. Remember that all five ETFs were in bear market territory at their Christmas lows, down 20% or more from their 2018 all-time intraday highs. Some say that the S&P did not decline by 20%, but it’s wrong to measure this from a closing high.

Here’s Today’s Scorecard

Scorecard For The Equity ETFs

SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Daily Chart For Diamonds Courtesy of MetaStock Xenith

Diamonds ETF has been below a “death cross” since Dec. 19 with the ETF between its 50-day and 200-day simple moving average now at $242.27 and $249.77, respectively. Investors following this indicator should reduce holdings at the 200-day SMA. DIA set its all-time intraday high of $269.28 on Oct. 3 and is 8.1% below that level. DIA is 14% above its 2018 low of $216.97 set on Dec. 26.

The weekly chart for Diamonds is positive with the ETF above its five-week modified moving average at $242.73. DIA is above its 200-week simple moving average or “reversion to the mean” at $208.08. The 12x3x3 weekly slow stochastic reading ended last week rising to 43.11, up from 34.44 on Jan. 18. My semiannual pivot is $243.47. Reduce holdings on strength to my monthly and annual risky levels at $255.89 and $257.94, respectively.

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

Daily Chart For Spiders Courtesy of MetaStock Xenith

The Spiders ETF has been under a “death cross” since Dec. 7 with SPY between the 50-day and 200-day SMAs now at $261.18 and $273.87, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. SPY set its all-time intraday high of $293.94 on Sept. 21 and is 9.5% below that level. SPY is 13.8% above its 2018 low of $233.76 set on Dec. 26.

The weekly chart for Spiders is positive with the ETF above its five-week modified moving average at $261.65. SPY is above its 200-week simple moving average or “reversion to the mean” at $235.78 after this average held at $234.71 during the week of Dec. 28. The 12x3x3 weekly slow stochastic reading ended last week rising to 44.40, up from 35.02 on Jan. 18. My semiannual pivot is $266.14. Reduce holdings on strength to my monthly and annual risky levels at $280.09 and $285.86, respectively.

Invesco QQQ ETF (NASDAQ:QQQ)

Daily Chart For QQQ Courtesy of MetaStock Xenith

QQQ has been below a “death cross” on Dec. 3 with the ETF between its 50-day SMA and 200-day SMA now at $160.89 and $171.41, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. QQQ set its all-time intraday high of $187.53 on Oct. 1 and remains in correction territory 11.9% below this level. QQQ is 15.1% above its 2018 low of $143.46 set on Dec. 24.

The weekly chart for QQQ remains positive with the ETF above its five-week modified moving average at $161.99. QQQ is above its 200-week simple moving average or “reversion to the mean” at $134.76. The 12x3x3 weekly slow stochastic reading ended last week rising to 44.05, up from 34.58 on Jan. 18. Reduce holdings on strength to my semiannual, annual and monthly risky levels at $167.53, $169.27 and $180.91, respectively.

iShares Transportation Average ETF (NYSEARCA:IYT)

Daily Chart For The Transports ETF Courtesy of MetaStock Xenith

IYT formed a “death cross” on Nov. 26 with the ETF now between its 50-day and 200-day SMAs now at $176.96 and $190.53, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. The transports ETF set its all-time intraday high of $209.43 on Sept. 14 and remains in correction territory 14.8% below the high. IYT is 14.9% above its 2018 low of $155.24 set on Dec. 24.

The weekly chart for IYT remains positive with the ETF above its five-week modified moving average at $176.18. The ETF is above its 200-week simple moving average or “reversion to the mean” at $164.14. The 12x3x3 weekly slow stochastic reading rose to 34.70 last week, up from 27.09 on Jan. 18.

My call a for a bear market rally came from this ETF. My semiannual value level held during the week of Jan. 4, and the close that week was above the “reversion to the mean” at $163.89. This clearly shows how my chart discipline works. Buy weakness to my semiannual value level at $159. 63 and reduce holdings on strength to my monthly, quarterly and annual risky levels at $189.29, $195.81 and $196.35, respectively.

iShares Russell 2000 ETF (NYSEARCA:IWM)

Daily Chart For The Russell 2000 ETF Courtesy of MetaStock Xenith

IWM has been below a “death cross” since Nov. 13 with the ETF now between the 50-day and 200-day SMAs now at $143.10 and $158.19, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. This ETF set its all-time intraday high of $173.39 on Aug. 31 and remains in correction territory 15% below the high. IWM is 17.1% above its 2018 low of $125.81 set on Dec. 26.

The weekly chart for IWM remains positive with the ETF above its five-week modified moving average at $144.09. The ETF is above its 200-week SMA or “reversion to the mean” at $135.02. The 12x3x3 weekly slow stochastic reading rose to 42.02 last week, up from 31.39 on Jan. 19. The ETF is above its “reversion to the mean” at $135.02. Reduce holdings on strength to my semiannual, annual, monthly and quarterly risky levels at $149.77, $157.49, $158.78 and $160.93, respectively.

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.