The Bear Market Rally For Equity ETFs Extended Again Last Week

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

The Diamonds ETF closed Friday just above my annual and monthly risky levels at $257.94 and $258.33.

The Spiders ETF closed Friday just below its monthly risky level at $277.88 with my annual risky level at $285.86.

The QQQ ETF closed Friday just above its 200-day SMA at $171.88 with my monthly risky level at $174.44.

The transports ETF closed Friday just above its 200-day SMA at $190.18 with my quarterly and annual risky levels at $195.81 and $196.35, respectively.

The Russell 2000 ETF closed Friday below its annual risky level at $157.49 and its 200-day SMA at $157.86.

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

The Federal Reserve is using its balance sheet to adjust monetary policy: Last week there were more comments that the FOMC will keep the federal funds rate at 2.25% to 2.50%. There was even chatter that the Fed would lower the funds rate. My theme is that the FOMC will not raise or lower the funds rate in 2019. My prediction since the Jan. 30 policy statement is that the FOMC would use its balance sheet to implement monetary policy. This call seems to be gaining credence as the Fed increased its balance sheet during the week ended Feb. 13 by $2 billion to $4.028 trillion, up from $4.026 on Feb. 6. The balance sheet is now $472 billion, below the $4.5 trillion where it was at the end of September 2017.

When to use closing highs and lows versus using intraday highs and lows? Daily closes should only be used when calculating moving averages and stochastic readings. The idea of using closing highs and lows to measure corrections and bull or bear market measures ended more than thirty years ago. In the old days, the exchanges did not create a data base that included intraday highs and lows so the only chartable levels using paper and pencil were the closes. When charts were on computer screens, the daily intraday highs and lows became available. This has been the measure I have used since 1984 when I helped a company called Market Vision keep track of more data. The Market Vision charts have evolved into the charts I currently use on MetaStock. I do not know anyone who draws trendlines or Fibonacci retracements between closing highs and lows. The financial media should update the information they feed to the public.

Technical jargon for the Nasdaq: One financial media channel is saying that the Nasdaq is about to rise out of bear market territory when it closes more than 20% above its Dec. 24 closing low. I say they are wrong! At the Nasdaq Dec. 24 intraday low of 6,190.17, this index was in bear market territory, down 23.9% from its all-time intraday high of 8,133.30 set on Aug. 30. The price action on Dec. 26 pulled the Nasdaq out of bear market territory. The Nasdaq closed Friday up 20.7% from its Dec. 24 intraday low which defines a bull market within a bear market rally because the Nasdaq is still 8.1% below its all-time intraday high.

Here’s Today’s Scorecard

Scorecard for the Five Equity ETFs

SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Daily Chart For DIA Courtesy of MetaStock Xenith

The Diamonds ETF has been influenced by a “death cross” formation since Dec. 19, with DIA above its 50-day and 200-day simple moving average now at $242.61 and $250.39, respectively. DIA set its all-time intraday high of $269.28 on Oct. 3 and is just 3.9% below that level. DIA is 19.2% 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 $248.28. DIA is well above its 200-week simple moving average or “reversion to the mean” at $209.21. The 12x3x3 weekly slow stochastic reading rose to 67.68 last week, up from 59.38 on Feb. 8. Buy weakness to my semiannual value level at $243.47 and reduce holdings on strength to my weekly and quarterly risky levels at $268.70 and $270.43, respectively. DIA is just above my annual and monthly pivots at $257.94 and $258.33, respectively, where positions were reduced last Friday.

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

Daily Chart For SPY Courtesy of MetaStock Xenith

The Spiders ETF has been influenced by a “death cross” since Dec. 7 with SPY above its 50-day and 200-day SMAs now at $261.23 and $274.00, respectively. SPY set its all-time intraday high of $293.94 on Sept. 21 and is 5.6% below that level. SPY is 18.7% 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 $267.28. SPY is above its 200-week simple moving average or “reversion to the mean” at $236.75 after this average held at $234.71 during the week of Dec. 28. The 12x3x3 weekly slow stochastic reading rose to 68.11 last week, up from 60.49 on Feb. 8. Buy weakness to my semiannual value level at $266.14 and reduce holdings on strength to my monthly and annual risky levels at $277.44 and $285.86, respectively. My weekly and quarterly risky levels are $289.77 and $292.16, respectively.

Invesco QQQ ETF (NASDAQ:QQQ)

Daily Chart For QQQ Courtesy of MetaStock Xenith

The QQQ ETF has been influenced by a “death cross” on Dec. 3, with the ETF above its 50-day SMA and 200-day SMA now at $161.85 and $171.88, respectively. QQQ set its all-time intraday high of $187.53 on Oct. 1 and is now 8.3% below this level. QQQ is 19.9% 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 $165.73. QQQ is above its 200-week simple moving average or “reversion to the mean” at $135.70. The 12x3x3 weekly slow stochastic reading rose to 69.76 last week, up from 61.34 on Feb. 8. Buy weakness to my annual and semiannual pivots at $169.27 and $167.53, respectively, and reduce holdings on strength to my monthly, weekly and quarterly risky levels at $174.44, $181.38 and $192.04, respectively.

iShares Transportation Average ETF (NYSEARCA:IYT)

Daily Chart For IYT Courtesy of MetaStock Xenith

IYT has been influenced by a “death cross” since Nov. 26 with the ETF just above its 200-day SMA at $190.18 and with its 50-day SMA at $175.72. The transports ETF set its all-time intraday high of $209.43 on Sept. 14, and currently 9.1% below this level. IYT is 22.6% 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 $180.89. The ETF is above its 200-week simple moving average or “reversion to the mean” at $164.59. The 12x3x3 weekly slow stochastic reading rose to 54.64 last week up from 47.79 on Feb. 8. Buy weakness to my monthly and semiannual value levels at $183.46 and $159.63, respectively, and reduce holdings on strength to my quarterly, annual and weekly risky levels at $195.81, $196.35 and $199.22, respectively.

iShares Russell 2000 ETF (NYSEARCA:IWM)

Daily Chart For IWM Courtesy of MetaStock Xenith

IWM has influenced by a “death cross” since Nov. 13, with the ETF now between its 50-day and 200-day SMAs at $143.19 and $157.86, 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 is now 9.9% below this level. IWM is 24.2% 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 $148.09. The ETF is above its 200-week SMA or “reversion to the mean” at $135.42. The 12x3x3 weekly slow stochastic reading rose to 69.80 last week, up from 60.48 on Feb. 8. Buy weakness to my semiannual and monthly value levels at $149.72 and $149.65, respectively, and reduce holdings on strength to my annual, quarterly and weekly risky levels at $157.49, $160.93 and $165.64, 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.