The Bear Market Rally Stalled At Key Levels Last Week

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

The Diamonds ETF closed above its 200-day simple moving average at again $250.06 last week.

The Spiders ETF stayed above its semiannual pivot at $266.14 but stalled below its 200-day SMA at $274.00.

The QQQ ETF closed between my semiannual and annual risky levels at $167.53 and $169.27 but stalled below its 200-day SMA at $171.65.

The transports ETF has stalled around my monthly pivot for February at $183.46.

The Russell 2000 ETF stalled around my monthly and semiannual pivots at $149.65 and $149.77.

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

The Federal Reserve continues to unwind its balance sheet: The FOMC tightened monetary policy in January without raising rates. As of Feb. 6, the balance sheet was marked at $4.026 trillion, down $474 billion since the end of September 2017 when it was $4.5 trillion. The total drain in January was $32 billion, assuming the $14 billion unwind of last week was due to maturing treasuries on Jan. 31. Did this contribute to last week’s stock market volatility? I think so!

My call for the FOMC: The Federal Reserve will likely keep the federal funds rate at 2.25% to 2.50% as their revised “normal”. The Fed balance sheet will become a primary monetary policy tool as the unwinding continues, but longer term, they could increase the balance sheet without using quantitative easing measures.

Here’s Today’s Scorecard

Scorecard For The 5 Equity ETFs

SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Daily Chart For Diamonds Courtesy of MetaStock Xenith

Diamonds have been below a “death cross” since Dec. 19 with DIA above its 50-day and 200-day simple moving averages now at $242.49 and $250.06, respectively. Investors following this reduced holdings at the 200-day SMA. DIA set its all-time intraday high of $269.28 on Oct. 3 and is 6.7% below that level. DIA is 15.8% 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 $245.69. DIA is above its 200-week simple moving average or “reversion to the mean” at $208.81. The 12x3x3 weekly slow stochastic reading ended last week rising to 59.38, up from 51.95 on Feb. 1. Buy weakness to my semiannual pivot and this week’s value level at $243.47 and $242.23, respectively, and reduce holdings on strength to annual and monthly risky levels at $257.94 and $258.33, respectively. My quarterly risky level is $270.43.

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 its 50-day and 200-day SMAs now at $261.23 and $274.00, 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 8% below that level. SPY is 15.7% 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 $264.76. SPY is above its 200-week simple moving average or “reversion to the mean” at $236.40 after this average held at $234.71 during the week of Dec. 28. The 12x3x3 weekly slow stochastic reading ended last week rising to 60.49, up from 53.40 on Feb. 1. My semiannual pivot is $266.14. Buy weakness to my weekly value level at $260.22. Reduce holdings on strength to my monthly and annual risky levels at $277.44 and $285.86, respectively. My quarterly risky level is $292.16.

Invesco QQQ ETF (NASDAQ:QQQ)

Daily Chart For QQQs 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 $161.62 and $171.65, 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 10.1% below this level. QQQ is 17.5% 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 $164.17. QQQ is above its 200-week simple moving average or “reversion to the mean” at $135.37. The 12x3x3 weekly slow stochastic reading ended last week rising to 61.34, up from 53.34 on Feb. 1. Investors could have reduced holdings between my semiannual and annual pivots at $167.53 and $169.27, respectively. Buy on weakness to my weekly value level at $161.70 and reduce holdings on strength to my new monthly risky level at $174.44. My quarterly risky level is $192.04.

iShares Transportation Average ETF (NYSEARCA:IYT)

Daily Chart For 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 $175.72 and $190.18, 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 12.5% below the high. IYT is 18% 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 $178.53. The ETF is above its 200-week simple moving average or “reversion to the mean” at $164.41. The 12x3x3 weekly slow stochastic reading rose to 47.79 last week, up from 42.06 on Feb. 1. Buy weakness to my weekly and semiannual value levels at $166.48 and $159.63, respectively and reduce holdings on strength to my quarterly and annual risky levels at $195.81 and $196.35, respectively. My monthly pivot remains at $183.36.

iShares Russell 2000 ETF (NYSEARCA:IWM)

Daily Chart For Russell 2000 ETF Courtesy of MetaStock Xenith

IWM has been below a “death cross” since Nov. 13 with the ETF now between its 50-day and 200-day SMAs now at $143.02 and $157.87, 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 13.6% below the high. IWM is 19.1% 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 $146.05. The ETF is above its 200-week SMA or “reversion to the mean” at $135.26. The 12x3x3 weekly slow stochastic reading rose to 60.48 last week, up from 51.98 on Feb. 1. Investors reduced holdings between my monthly and semiannual pivots at $149.65 and $149.77, respectively. Buy weakness to my weekly value level at $139.48 and reduce holdings on strength to my annual and quarterly risky levels at $157.49 and $160.93, respectively. My monthly and semiannual pivots remain at $149.65 and $149.77, 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.