Last week the Fed-Chair Janet Yellen suggested that the case for raising the Fed-Fund rate was growing stronger and that a September hike could well be in the cards. Sure enough, the market responded by taking a 120 point nosedive on the DOW.
Then an incoming jobs report showed that the U.S. employment growth slowed more than expected in August, and that triggered the DOW into a 70 point rally by the end of the session. Go figure.
It appears that this market will remain geared for higher highs, even with some flip-flops in between. This is again a "Goldilocks" economy, not too hot and not too cold, and the market likes that.
Check last Friday's DOW chart [INDU] and note that the market went through a solid consolidation period after its sharp run-up in February. Then it rallied sharply again in July only to take a breather up to last Friday.
This is an excellent setup for higher highs in the weeks ahead. This market has solid support from its Moving-Average lines configuration with the red line above the green line. While the RSI strength indicator remains in a stall mode, the MACD momentum bars are still comatose below the demarcation line. For as long as that is the case, the market will mainly keep floating sideways.
But that is about to change as August money-flows confirmed the ongoing rise in market participants' appetite for risk as U.S. and international equity ETFs are becoming increasingly more popular.
That is especially the case with the previously lagging emerging market ETFs, financials, energy and technology, not exactly the top of defensive issues.
The NASDAQ [NDX] appears to be getting ready to rally. This index keeps consolidating at a high "take-off" plateau while the RSI strength indicator is solid in its bullish territory.
What is holding this index back is the MA lines configuration with this wide gap between the red line above the green. This shows that NASDAQ is extremely overbought and has hit the ceiling.
Meanwhile the MACD momentum bars continue to keep below the demarcation line which shows that there is no momentum in this market, bullish or bearish.
Only when that changes will the fun return to this game.
The biotech sector [IBB] has rallied too far too fast and needs to come down some more before finding renewed traction to the upside. Although this index has come down quite a bit, it still remains topheavy with this wide gap between the red line above the green. Also, the RSI strength indicator and MACD momentum bars will have to rise above their respective demarcation lines before the market can even attempt to rally .
The technology sector [XLK] is trying to build a base from which to rally. But even though the RSI strength indicator remains solid in its bullish territory, for as long as the MA lines configuration remains heavily overbought [large gap between the red line above the green] the techs remain vulnerable to a sharp selloff.
This is especially the case for as long as the MACD momentum bars keep below the demarcation line.
Energy [XLE] could surprise investors. There is just the right bullish gap between the red line above the green, while the RSI strength indicator is taking a breather on the neutral line.
But just as is the case with most of the other major indexes, for as long as the momentum bars remain south of the demarcation line, there is no momentum in this game in either direction.
The semis [SOX] rallied too far too fast, which caused the MA lines configuration to become overbought and top-heavy with this large gap between the red line above the green while the RSI strength indicator is also sharply overbought.
Meanwhile, the MACD momentum bars continue to hang south of the demarcation line, which indicates that there is still no momentum to guide this market.
Financials [XLF] have hit the ceiling, are overbought and in need of a consolidating pullback. After that, financials are well positioned to rally again.
Both, small-caps [SML] and mid-caps [IJH] have to rally in tandem for any market advance to be sustained. So far so good, but still the MACD momentum bars of both indexes will have to rise above the demarcation line for solid rallies to kick into gear.
The bulls in this game [BPS] keep trying to consolidate and they seem to be succeeding. This index is well supported by a bullish MA lines configuration with the red line above the green. But the MACD momentum bars are still stuck in neutral along the demarcation line. This means that there is very little momentum, if any behind the bulls' rally attempts.
Just like last July, the commodity market [GTX] seems to be again sinking into a deep hole. But if the red MA line could manage to rally above the green, the GTX may do so as well.
But first the RSI strength indicator and MACD momentum bars will have to rise back into their respective bullish territories or any GTX rally attempt will stall.
The yellow metal [GOLD] continues to lose traction. Even though this index had a bit of a snap-back rally, with the MA lines configuration about to turn bearish with the red line slipping below the green, gold hasn't got a chance to rally in a sustained fashion.
Also, that both the RSI strength indicator and MACD momentum bars continue to be stuck in their respective bearish territories will keep a lid on the price of gold.
Oil [WTIC] is showing signs of life in that the red MA line is crossing above the green MA line.
But for as long as the MACD momentum bars and RSI strength indicator remain stuck in their respective bearish territories, oil will be unable to rally in a sustained fashion.
Although the market appears to be stuck in neutral, here are some favored ETFs in case the market gets unstuck your way.
Financials, Technology, Cyclical, Health-Care, Materials.
Leveraged Bull ETFs:
Semis 3x (NYSEARCA:SOXL), DOW 3x (NYSEARCA:UDOW), Technology 3x (NYSEARCA:TECL), S&P 500, 3x (NYSEARCA:UPRO), Financials 3x (NYSEARCA:FAS), Mid-Caps 2x (NYSEARCA:MVV), Financials 2x (NYSEARCA:UYG), NASDAQ 2x (NYSEARCA:QLD), Russell 2000, 3x (NYSEARCA:URTY), Healthcare 3x (NYSEARCA:CURE), S&P Bull 3x (NYSEARCA:SPXL);
Non-Leveraged Long ETFs:
Industrials (NYSEARCA:XLI), Semis (NYSEARCA:XSD), Technology (NYSEARCA:IGM), S&P 500 (NYSEARCA:IVW), Internet (NASDAQ:PNQI), Mid-Caps (NYSEARCA:IWP), Telecom (NYSEARCA:FCOM), Discretionary (NYSEARCA:XLY), Small-Caps (NYSE:RZV), Health-Care (NYSEARCA:XHS);
Leveraged Bear ETFs:
S&P 500, 2x (NYSEARCA:SDS), Financials 3x (NYSEARCA:FAZ), NASDAQ 2x (QID), Gold-Miners 2x (NYSEARCA:DUST), Mid-Caps 3x (NYSEARCA:MIDZ), S&P 500, 3x (NYSEARCA:SPXS) Base-Metals 2x (NYSEARCA:BOM), Commodity 2x (NYSEARCA:DEE);
Non-Leveraged Short ETFs:
Oil (NYSEARCA:DNO), Emerging Markets (NYSEARCA:EUM), Active Bear (NYSEARCA:HDGE), Financials (SEF), S&P 500 (NYSEARCA:SH), DOW (NYSE:DOG), Gold (NYSEARCA:DGZ), NASDAQ (NYSEARCA:PSQ), OIL (NYSEARCA:SZO), Small-Caps (NYSEARCA:SBB);
Check my Home-Page for more ETF and market info; and