US Dollar, Gold and Silver Update 4-30-16

DXY – US Dollar Index

 Long Term Chart – 1986- present

The US Dollar has found significant resistance at the Long Term downtrend line, and appears to be in jeopardy of failing from current levels to resume the long term downtrend.

Here is a better look at the long term down trend, as the chart above was not able to pull the data to show the 1980’s highs.

DXY – US Dollar Index – Daily Chart

On the daily chart we can see a potential double top forming from the March 2015 highs to the November 2015 highs.  We will need to see another leg down to trigger the pattern.  This pattern would suggest more downside to come and likely a significant top.

A closer look at the daily chart shows a breakdown below the lower support line of a declining wedge pattern.  A breakdown declining wedge after an uptrend period often suggests the beginning of a sustained trend reversal and is further evidence of lower prices to come.  A decline wedge in this context is called a leading diagonal pattern.  We will need to see a reversal to the upside from current levels to negate this view.

GLD – SPDR GOLD SHARES – Weekly Chart

Commodities, and in particular gold and other precious metals, have a clear inverse relationship to the US Dollar.  We can see on the GLD weekly chart a breakout to the upside from a declining rage suggesting a reversal from the current trend and a potential continuation of the long term uptrend.  Gold seems to be anticipating a further breakdown in the US Dollar.

GLD Daily Chart

A closer look at the daily chart shows a breakout of the range followed by a retest and follow through to the upside.

SLV – ISHARES SILVER TRUST – Weekly Chart

We see a similair breakout on Silver weekly chart.  The declining wedge in this context would be called an ending diagonal pattern and is a fairly reliable bottoming pattern after a prolonged downtrend.

A closer look at the breakout.

IAU – COMEX GOLD ETF – Weekly Chart

IUA Daily – Breakout, retest and follow through.

NEM – Newmont Mining – Weekly Chart

Bellwether gold stock shows a big breakout above resistance.  The shares are currently testing the first level of resistance following the extension of the breakout.

ABX – Barrick Gold

GG – Goldcorp – Weekly Chart

SLW – Silver Wheaton Corp – Weekly Chart

Ending diagonal breakout.

SSRI – Silver Standard Resources – Weekly Chart

HL – Hecla Mining – Weekly Chart

 

 

Market Update 4-14-16

S&P Weekly Chart– From a long term chart perspective the S&P remains in LT uptrend.  The index held the trend line from the 2009 lows, but is currently attempting to break the downtrend line from the 2015 highs.  The question is –  Could this approaching earnings period be the catalyst for a breakout or breakdown from current levels signaling an acceleration of the LT trend or a further correction?

S&P Daily Chart – Broke out of interim resistance this week and appears setup for a test of the downtrend line from the 2015 highs.  A breakout above ~2105 would signal a resumption and acceleration of the overall LT uptrend.  A failure near current levels would signal the correction in the market is not over and we may need to consolidate further.  These levels remain an attractive short from a risk/reward standpoint in my opinion.  A breakout above 2105 would be the signal to cover.

QQQ Weekly – The Q’s remain in a LT uptrend as well, but testing intermediate downtrend resistance.

QQQ Daily – Trying to break above the intermediate resistance.

INDU Weekly – The Dow remains in an overall LT uptrend, but the index did breakdown below the LT uptrend line late last year, and does remain in an intermediate downtrend.  The Dow tends to be the leading index so will the other major indexes follow and breakdown below the LT trend line or will the Dow breakout above the previous interim high and break the intermediate downtrend?

INDU Daily – The Dow broke above the intermediate downtrend line earlier this week.  Is that a signal that it will breakout above the interim highs set in December near 17,800?  If we do breakout above the December highs that would trigger a massive double bottom pattern with significant upside targets.  Or will we fail at the December highs and continue in correction mode as earnings gets underway?

ACWI Weekly – World stock market index – The ACWI has had a sharp correction into support after breaking its 2009 uptrend line and remains in an intermediate downtrend.  Is the intermediate downtrend concluded as we move above the channel this week? Or will we move above the December highs near $59 to signal the correction is over?

ACWI Daily

Crude Oil Weekly – Oil may hold the key.  Crude futures sold off sharply into LT support and appears to be trying to breakout of a bullish falling wedge pattern.  If crude follows through with the breakout and moves sharply higher that could be the catalyst to signal the all clear for the current stock market correction.

Crude Futures Daily – Does crude have enough momentum to breakout and signal a head and shoulders bottom?

US Dollar Weekly – The US Dollar and Crude have a clear inverse trading relationship.  A breakdown below current consolidation in the US Dollar would be necessary to confirm the breakout in Crude.

US Dollar Daily

Charts to Watch This Week

 

ACWI  – MSCI ACWI  is composed of large- and mid-capitalization developed and emerging market equities and a good barometer of the world equity market.

• The index broke the long term trend line last August and has followed through to the downside.
• We are now approaching an important confluence of support around the $47 area that will have big implications when tested.
  • If the $47 level fails to hold in the near future along with confirmation of a break then it is likely that the 2015 highs will be a significant top.  This will signal that the bullish options are off the table and a new downtrend and deeper correction is underway.
  • If these support levels hold and a convincing reversal takes place then the more bullish options of a new phase of the bull market or additional consolidation are still in play.
• This support level is similar in nature to the 1840 level in the S&P.  If the S&P breaks 1840 then the ACWI doesn’t stand a chance.

US Cap weighted indexes – Small-cap, Mid-cap, and Large-cap

The breakdown of the SLY (small-cap) index, followed by the MDY (mid-caps), and then the FEX (Large-caps) is very troubling as they been among the first charts to trigger significant topping patterns.  These charts suggest there is significant risk of the S&P breaking down below the 1840 level and signaling a new period of correction for the broad markets.

SLY – S&P 600 Small-cap ETF

• The long term uptrend line from the 2009 lows has been broken to the downside.  A lower high and lower low has since been made confirming a new downtrend.

MDY-Midcap SPDR 

• The uptrend line from the 2009 low has been broken to the downside. A lower high and lower low have been made.
• The neckline of a head and shoulders topping pattern is being tested/broken on elevated volume.
• The window is closing for a meaningful reversal and momentum is building for a deep correction.

FEX – Large-cap

• The uptrend line from the 2009 low has been broken to the downside. A lower high and lower low have been made.
• The neckline of a head and shoulders topping pattern is being tested/broken on elevated volume.
• The window is closing for a meaningful reversal and momentum is building for a deep correction.

XLB – US Materials Sector ETF

• The long term uptrend line from the 2009 lows was broken decisively back in July after a ending diagonal topping pattern was triggered.  A series of lower lows and lower highs have confirmed a new downtrend has emerged.

XLI – Industrials ETF

• The uptrend line from the 2009 low has been broken to the downside. A lower high has been made and we are testing previous lows.
• The neckline of a head and shoulders topping pattern is being tested.
• The $48 level is critical support.

MS – Morgan Stanley

• Morgan Stanley reports earnings before the market opens on Tuesday and could have big implications for setting the tone of the market after a long weekend.
• Investor expectations have no doubt been set very low going into the call so it is likely we could see some short covering on a mediocre report.
• The stock has reached new lows in a clear downtrend from last years highs.  The $28 level should provide significant resistance on any strength.

BAC – Bank of America 

BAC Daily

• Bank of America reports on Tuesday as well and should also help set the tone for the start of the week.  Investor expectations are likely very low going into the report.
• The stock is testing the lower boundary of a 2 year range and briefly dipped below on Friday.  We will see if Tuesdays report is a catalyst for a significant breakdown below the range or enough to keep it inside a little longer.

GS – Goldman Sachs

GS Daily Chart

• Goldman Sachs reports Wednesday.  Expectations are likely very low.
• The stock has already broken down below the neckline of a head and shoulders topping pattern.  The target for this pattern should ultimately work its way to the $120 level.

XLF – Financials

• We will see if reports out of GS, BAC and MS will act as a catalyst to breakdown the Financials below their long term trend line from the 2009 lows or if it will be enough to keep them above.

DAL – Delta Airlines

• Delta Airlines reports Tuesday as well.  From a technical perspective the chart is looking very vulnerable.  We will see if the report confirms the double top pattern breakdown.  The $46 level will be key resistance on any strength.

NFLX – Netflix

NFLX Daily Chart

• NFLX reports Tuesday as well.  The stock is looking a bit vulnerable here as well with a potential double top pattern visible.  A close below the $94 level would signal the break, or possibly below the $88 level for a more conservative trigger.

HGX – PHLX Housing Index

• Housing data released this week – Housing market Index on Tuesday and Housing starts and mortgage applications on Wednesday.

3 Scenarios for the S&P 500 Long Term Trend

The first few weeks of 2016 have been rough.  A lower high was made in December  in many of the broad indexes and are now testing critical support levels with big implications for the long term trends.  Here are my thoughts on different scenarios for the S&P 500 in regards to the long term charts as we enter Q4 earnings.

SPX500 Weekly chart  2009-present

The S&P has fallen out of a nearly 4 year uptrend channel and looks to be entering a new phase in what has been a 6 year bull market.  Whenever a trend is entering a transition phase there are 3 scenarios to consider are:  BULLISH – Is this a pause in the trend that will ultimately resolve higher and enter a new phase of the overall uptrend?  FLAT – Is this a new period of consolidation and a flat market? BEARISH –  Or is a breakdown imminent and are we starting a new downtrend?

Here are some potential scenarios laid out on the charts with important levels to watch.

Scenario 1 – BULLISH – Long term uptrend continuation

• The uptrend line from the 2009 lows is intact.  This line needs to HOLD if we are to maintain the imminent resolution of the overall uptrend and for this scenario to remain valid. 
• We are currently testing levels close the the long term trend line.  Any near term price action cannot go below 1840 on a closing basis.  And we will need to reverse higher from current levels very soon.
• A new phase and resolution of the overall long term uptrend will be signaled when there is a  break above downtrend line form the recent highs and confirmed with a close above the December highs near 2115.

 

Scenario 2 – FLAT – Narrowing range for a while longer

• In this scenario, the long term uptrend line from the 2009 lows is broken BUT the 1840 level HOLDS as support of the lower boundary of a new range.
• The upper boundary would potentially be the downtrend line extended from recent highs.

 

Scenario 3 – BEARISH – Imminent breakdown and new downtrend emerges

• In this scenario, there is a breakdown below the 1840 level very soon on elevated volume.
• This would trigger a head & shoulders topping pattern and signal a new downtrend with 1840 become new resistance.  A typical target for this pattern would  be:
  • 2120 (Head) – 1840 (neckline) = 280pts     H&S target = 1840 – 280 = 1560
  • Indicates an additional 17% correction form current levels, and 26% from the 2015 highs.

 

 

 

 

Notes on US Sectors – XLK Technology

S&P Sector Weighting – 19.87% for Technology 

Price Action – Bullish overall with some warning signs of extension and potential for correction.

Technology is the highest weighted sector in the S&P 500 and has been among the best performing and leading sectors throughout the bull market.

From a technical standpoint the overall uptrend remains intact with the software and internet sectors leading the way and the networking and semiconductor sectors lagging behind.   The long term uptrends remain the dominant underlying force at the moment but there are number of names showing signs of extension and a few names putting in lower highs in December vs the XLK.  Overall the price action is considered to be bullish as there are few names breaking down below critical support levels at this time.

XLK – Technology

XLK Weekly Chart

• TREND – the long term uptrend remains intact and dominant as we test the trend line from the 2009 lows.
• The August lows near $37 is key support.
• RSI did not confirm December highs suggesting the trend may be a bit extended and may need to correct/consolidate further.

Top Holdings – AAPL, MSFT, GOOGL, FB, T, VZ, V, CSCO, INTC

AAPL – Apple

XLK Weighting – 16.03%

• TREND – the long term uptrend remains intact at this time.  However the stock made a lower high in December and is now close to testing the August lows.  This action appears so far as a healthy correction within a larger uptrend.
• AAPL made a lower high in December vs the XLK creating a bearish divergence from the broader index.  While this is not an actionable observation at this point, AAPL is the highest weighted component of the index and should give investors caution.  If AAPL breaks down further and an intermediate downtrend emerges, then the XLK is not far behind.
• The August lows near $93 is key support.

MSFT – Microsoft

XLK Weighting – 9.88%

• TREND – the long term uptrend remains intact.  The stock broke out of a bull flag in late 2015 and is holding at fresh highs.  The upper boundary of the range should serve as interim support.
• MSFT has notable relative strength vs the sector.

FB – Facebook

XLK Weighting – 5.42%

• TREND – the long term uptrend remains intact and healthy.
• The range in the RSI suggests sustainable upward momentum.
• FB is displaying notable relative strength vs the sector.

GOOGL – Alphabet Class A

XLK Weighting – 5.03%

• TREND – the long term uptrend remains intact.  The intermediate trend has accelerated to the upside after the July breakout.  The RSI divergence at the December highs suggest a bit of near term extension, but the trend line from the breakout is holding as support and is the dominant near term force.

GOOG – Alphabet Class C

XLK Weighting – 4.95%

GOOG Daily Chart

• TREND – The Class C shares are holding the same trend line as the Class A as shown on the daily chart.

T – AT&T

XLK Weighting – 4.80%

• TREND – the long term uptrend remains intact at this time.  However, the trend line from the 2009 lows has been broken to the downside and confirmed as interim resistance.
• The stock has fallen into a descending triangle pattern with the $32 holding as support so far.  These patterns tend to break to the downside as continued pressure on the lower boundary often give way as the pattern completes.  However, this should be treated as a continuation pattern within the long term uptrend until we get a breakout or breakdown through the pattern.  These narrowing range patterns are good option straddle plays as they have a limited time before pattern completes and price is forced to pick a direction.  Also, as the range narrows volatility in the options chain compresses making the volatility premium cheaper, once the pattern breaks out the volatility component explodes as price breaks out/down.

VZ – Verizon

XLK Weighting – 4.44%

• TREND – the long term uptrend is in jeopardy and a clear intermediate downtrend has emerged.  The stock has broken the descending triangle patten to the downside (similar pattern to its peer AT&T) and the lower boundary that was broken near $46 has been confirmed as resistance.
• Next support near $42.

V – Visa

XLK Weighting – 3.41%

• TREND – the long term uptrend remains intact and persistent.
• The lower highs in the RSI suggests some extension in the trend.
• The August lows near $60 is key support.
• High relative strength vs XLK.

CSCO – Cisco

XLK Weighting – 3.4%

• TREND – the long term uptrend remains intact at this time.  However, the uptrend line from the 2012 lows has been penetrated to the downside.
• The 2014 lows near $23 is key support to the long term trend.

INTC – Intel

XLK Weighting – 3.21%

• TREND – the long term uptrend remains intact and healthy.

 

SOX – PHLX Semiconductor Index

Top Holdings – INTC, TXN, QCOM, AVGO, TSM, SNDK, NVDA, ADI, AMAT, MU

• TREND – the long term uptrend remains intact at this time.
• The SOX made a lower high in December vs the XLK.
• The August lows near $540 is key support.

IGV – iShares Software 

Top Holdings – MSFT, ADBE CRM, ORCL, INTU, ERTS, ATVI, RHT, SYMC, CTXS

• TREND – the long term uptrend remains intact.  The uptrend from the 2012 lows is holding.
• Software is displaying high relative strength vs the XLK and has been a leading subsection of the technology space.
• RSI suggests a bit of extension but the intermediate uptrend remains dominant at this time.

FDN – Dow Jones Internet

Top Holdings – AMZN, GOOGL, FB, CRM, NFLX, PYPL, LNKD, EBAY, YHOO

• TREND – the long term uptrend remains intact.  The uptrend line from the 2012 lows is holding.
• High relative strength vs XLK.  Internet has been a leading sub sector in technology.
• RSI suggests a bit of extension at recent highs, but uptrend is dominant at this point.

IGN – iShares Networking

Top Holdings – QCOM, CSCO, HRS, MOT, PANW, JNPR, CIEN, ARRS, BRCD, VSAT

• TREND – the long term uptrend remains intact at this time.
• IGN made a lower high vs XLK in December.
• $31 is key long term trend support.

PBS – Powershares Media

Top Holdings – FB, GOOGL, DIS, FOX, SIRI, DISH,TWX, GTN

• TREND – the long term uptrend remain intact at this time.  The shares are now testing the lower boundary of a 2.5 year range as the long term trend line approaches.

Notes on US Sectors – XLF Financials

S&P Sector Weighting – 16.14% for Financials

Price Action – Potentially Bearish – testing critical support levels.

The financial sector has been the weakest overall sector since the emergence of the great recession.  The XLF remains well below its 2007 highs and are now flashing some warning signs on the charts. The XLF has reached a 0.618% retracement from the 2007 highs to the 2009 lows.  A 0.618% Fibonacci retracement is often where counter-trend moves within a larger trend terminate. This is concerning because it indicates the financial sector is still in a secular bear market and could be ready to resume its downtrend should the trend line from the 2009 lows fail to hold.  We are testing those levels now in the XLF.  A further breakdown from current levels could have bearish implications for the US and global markets.

Several of the top components of the XLF are flashing warning signs. A majority of holdings have put in lower highs in December and have taken out the trend line from the 2011 lows. Many are now breaking their September lows and signaling an emergence of a new intermediate downtrends.  A few names have already triggered topping patterns. GS (Goldman Sachs) has triggered a ominous head and shoulders topping pattern.  AXP (American Express) has triggered a triple top pattern, SPG (Simon Property Group) is close to triggering a double top and the XLF has triggered a ending diagonal topping pattern.

The next few weeks should be interesting as we make our way through earnings.

XLF – Financials

XLF Weekly Chart

• TREND – The long term uptrend remains intact… barely. The stock has made a lower high in December and now closed below the September lows for a lower low confirming a near term downtrend has emerged.  The trend line form the 2009 lows is critical trend support.
• An ending diagonal pattern formed in 2015 and has since triggered the topping pattern with a move below the lower boundary of the pattern.
• The long term uptrend line from the 2009 lows currently near $21 is CRITICAL support.

XLF Monthly Chart – Fibonacci Retracement

• The XLF Monthly chart shows how much the financial sector has lagged the larger market since the great recession with the sector still well below their 2007 highs.
• The XLF is now at a full fibonacci retracement reading of 0.618% from the 2007 highs to the 2009 lows.
• This indicates that the financial sector is still in a secular bear market and rally from the 2009 lows was a counter trend move within the context of a larger bear market.  Should the 2009 trend line break to the downside, it could have very bearish implications for the sector and no doubt the US and global markets.

Top Holdings – BRK.A, WFC, JPM, BAC, C, AIG, GS, USB, SPG, AXP

BRK.A – Berkshire Hathaway

XLF Weighting – 8.6%

• TREND – The long term uptrend is still intact. However has been in a steady intermediate downtrend for all of 2015, which finally in August, took out the trend line from the 2011 lows.  The stock is testing the lower boundary of a pennant pattern which has appeared corrective within the context of the long term trend.  A breakdown below this pattern would indicate an acceleration of the intermediate downtrend.

WFC – Wells Fargo

XLF Weighting – 8.5%

• TREND – the long term uptrend is still intact.  However, a lower high has been made in December following a breakdown below the trend line from the 2011 lows and threatening to make a new low confirming an emergence of an intermediate downtrend.
• The August lows near $48 is CRITICAL support.  This support level coincides with the long term trend line from the 2009 lows as well the neckline of a potential head and shoulders topping pattern.

JPM – JP Morgan

XLF Weighting – 8.04%

• TREND – the long term uptrend remains intact.  However, the stock made a lower high in December and just made a lower low with a close below the September lows.  This confirms the emergence of a new intermediate downtrend.
• The January 2015 lows near $54 is key support.

BAC – Bank of America

XLF Weighting – 5.92%

• TREND – the long term uptrend remains intact.  However, the stock made a lower high in December after breaking the trending from the 2011 lows. The stock is now testing the lower boundary of a 2 year range, just below the 2010 highs,and threatening to make a new low below the September lows. A breakdown below the range would confirm an emergence of a new intermediate downtrend and signal an acceleration of downside momentum.
• The September lows and the lower boundary of the 2 year range near $14.50 is CRITICAL support.

C – Citigroup

XLF Weighting – 5.37%

• TREND – the long term uptrend remains intact.  However, the stock made a lower high in December and just made a lower low with a close below the September lows.  This confirms the emergence of a new intermediate downtrend.
• The stock is now testing the lower boundary of a 2.5 year range near $45 with long term trend line support just below.  A breakdown below the trending from the 2009 lows would do significant technical damage and have very bearish implications.

AIG – American International Group

XLF Weighting – 2.73%

• TREND – the long term uptrend remains intact.  However, the stock made a lower high in December and is now testing the trend line from the 2011 lows.
• The September lows near $55 is key support.

GS – Goldman Sachs

XLF Weighting – 2.53%

• TREND – the long term uptrend remains intact.  However, the stock made a lower high in December following a breakdown below the trend line from the 2011 lows. The stock just made a lower low with a close below the September lows.  This confirms the emergence of a new intermediate downtrend.
• More importantly the stock just triggered a ominous head & shoulders topping pattern with a breakdown below the neckline of the pattern on increased volume.  The target for this pattern is down near the 120 level (below the trend line from the 2009 lows).
• This could be the canary in the coal mine for the financial sector in my opinion.

USB – US Bancorp

XLF Weighting – 2.34%

• TREND – the long term uptrend is in jeopardy with a break of the trend line from the 2009 lows. The stock made a lower high in December and is now testing the September lows.  A further breakdown from current levels would signal an emergence of a new downtrend.

SPG – Simon Property Group

XLF Weighting – 2.11%

• TREND – the long term uptrend remains intact at this time.  The stock made a lower high in December and is now testing the long term bull market trend line.
• The 2015 lows near $170 is CRITICAL support.  A breakdown below this level would trigger a double topping pattern and signal a new downtrend.

AXP – American Express Company

XLF Weighting – 2.09%

• TREND – the long term uptrend is broken and a new downtrend has emerged.
• The stock triggered a triple top pattern in 2015 with a breakdown below the 2014 lows near $82.  The new downtrend was confirmed with a breakdown below the bull market trend line from 2009.

Notes on US Sectors – XLV Healthcare

S&P Sector Weighting – 14.94% for Healthcare

The typical sector rotation model suggests the healthcare sector typically outperforms in the later stages of a bull market.  From the chart below we can see that the XLV has significantly outperformed the S&P 500 since 2012.

From a technical perspective the XLV and its top holding all remain in long term uptrends.  However, there are several names that have emerged into intermediate downtrends and several that have extended themselves and the charts suggest more near term consolidation/correction is likely.

XLV – Healthcare

XLV Weekly Chart – S&P 500 is orange line

• TREND – The long term uptrend remains intact but is showing signs of extension.
• The September lows near $65 is key near term support. The next level of support below $65 is the trend line support from the 2011 lows near $60.
• RSI has not confirm recent highs suggesting vulnerability to further correction/consolidation.
• The XLV has notably outperformed the S&P at this stage of the bull market.

Top Holdings – JNJ, PFE, GILD, MRK, AGN, AMGN, UNH, BMY, MDT, ABBV

JNJ – Johnson & Johnson

XLV Weighting – 10.34%

• TREND – the long term uptrend remains intact and appears stable at this time.  Shares are consolidating in a range just below the 2014 highs within the long term trend.
• The September lows near $90 is key support.
• The RSI divergence from previous highs has largely played out as the stock has consolidated from the 2014 highs.

PFE – Pfizer

XLV Weighting – 7.9%

• TREND – the long term uptrend remains intact but the chart is showing signs of further correction from current levels.  The trend line from the 2011 lows has been breached to the downside after making a lower high in 2015.
• Shares are testing key near term support at the September lows near $30.  A breakdown below this level will suggest further downside in an intermediate downtrend and a likely test of long term trend support at the 2009 trend line and the 2014 lows near $27.
• RSI non confirmation of recent highs suggests further vulnerability to correction/consolidation.

GILD – Gilead Sciences

XLV Weighting – 5.88%

• TREND – the long term uptrend remains intact but is showing signs of further correction from current levels.  The steep trend line from the 2012 lows has been breached to the downside.
• Testing key near term support near $94 at the bottom of the range established at the 2014 breakout.
• RSI non-confirmation of recent highs suggests vulnerability to further correction.

MRK – Merck & Co

XLV Weighting – 5.67%

• TREND – the long term uptrend remains intact.  However, the stock is in an intermediate downtrend from the 2014 highs.  The trend line from the 2011 lows has been broken to the downside in a series of lower highs and lower lows.
• The long term trend line form the 2009 lows near $47 is next support and the November 2013 reaction lows near $45 is critical long term trend support.

AGN – Allergan

XLV Weighting – 4.78%

• TREND – the long term uptrend remains intact.  The steep uptrend line from the 2013 lows has been broken and confirmed as interim resistance.
• The October lows near $260 is key support.
• The RSI non-confirmation warned of extension on recent highs and a correction/consolidation period has materialized.

AMGN – Amgen

XLV Weighting – 4.50%

• TREND – the long term uptrend remains intact.  The trend line from the 2011 lows is being tested.
• The September lows near $135 is key near term support.

UNH – Unitedhealth Group

XLV Weighting – 4.17%

• TREND – the long term uptrend remains intact.  The stock has consolidated n a range just below recent highs and is working its way toward a test of the trend line from the 2013 lows.

BMY – Bristol Myers Squibb

XLV Weighting – 4.03%

• TREND – the long term uptrend remains intact.  The stock has consolidated in a range just above the trend line from the 2013 lows.
• – The September lows near $58 is key support.

MDT – Medtronic

XLV Weighting -3.93%

• TREND – the long term uptrend remains intact.  The stock has consolidated in a range just below recent highs after a successful test of the trend line from the 2011 lows at the September lows.

 

 

Notes on US Sectors – XLI Industrials

S&P Sector Weighting – 10.32% for Industrials

Price Action – Mixed to bearish in the intermediate term.

The Industrials sector includes companies that manufacture and distribute capital goods in support of industries such as aerospace and defense, construction and engineering, and electrical equipment and heavy machinery.  Industrials have benefited from a strong economy, low interest rates and low oil prices.

Industrials have closely tracked the S&P 500 throughout the course of the bull market.  While they only make up 10% of the weighting in the S&P 500 they are an important sector to watch for an overall gauge of the economy and health of the market.  Industrials tend to perform best in the middle stage of a bull market when the economy is in full swing.

The long term uptrends in the sector are generally still intact at the moment but are showing some warning signs on the charts.  The potential head and shoulders top is looming and most technical traders are surely aware.  A breakdown below the neckline will have bearish implications for the sector and for the market as a whole.  My concern about these types of patters like the head and shoulders top is that they are well known and this one is quite obvious (same pattern in the Dow and S&P).  Such obvious technical patterns are often gamed as many make the same play, the market will often become more volatile as traders get shaken out.  So I believe a false signal or bear trap should be considered on a breakdown.  The purpose of going through the components of the index, as well as other sectors and financial markets is to confirm whether a breakdown through a pattern like that is likely valid or a head fake.  There are some components in the index that are looking a bit shaky and are testing key trend support levels, while some have already broken long term uptrends that increase the odds of a breakdown of a head and shoulders top would be a valid one should it occur.

Top weighted XLI holdings holding their uptrends: GE, BA, DHR, and LMT.

Testing key trend support levels: HON, MMM, and UPS.

Already broken down through significant trend supports:  UTX, UNP, and GD.

XLI – Industrials

XLI Weekly Chart – S&P 500 is the orange line

• TREND – The long term uptrend remains intact at this time.  The long term trend line from the 2009 lows has been broken to the downside.
• The August lows near $48 is critical trend support.
• A potential head and shoulders topping pattern is forming.  The pattern will trigger with a breakdown below $48 on increased volume and signal a significant top is in place.  The likely target for this pattern is near the $40 area.
• The XLI has closely tracked the SPX over the course of the bull market.

Top Holdings – GE, MMM, BA, HON, UTX, UNP, UPS, DHR, LMT, GD

GE – General Electric

XLI Weighting – 11.30%

• TREND – The long term uptrend remains intact and appears healthy.
• The stock broke out of a bullish continuation pattern (bull flag) to new highs.  The upper boundary should be solid near term support.
• The bearish divergence made on recent highs vs the RSI signal the stock may need to digest gains further in the near term.

MMM – 3M Corp

XLI Weighting – 5.27%

• TREND – The long term uptrend remain intact at this time.
• The August lows near $137 is key trend support.
• The RSI has not confirmed recent highs signaling the trend may be a bit extended and vulnerable to further correction.
• A potential head and shoulders topping pattern is forming.  The pattern will trigger with a breakdown below $137 on increased volume and signal a significant top is in place.  The likely target for this pattern is near the $100 area.

BA – Boeing

XLI Weighting – 5.09%

• TREND – The long term uptrend remains intact.
• The August lows are near term support as is the upper boundary of the bull flag that was broken to the upside in early 2015.
• The bearish divergence warning in the RSI at the 2015 highs has materialized into consolidation within the long term trend.

HON –  Honeywell

XLI Weighting – 4.42%

• The long term uptrend remains intact. The uptrend line from the 2011 lows is being tested.
• August lows near $92 are key near term support.
• The persistent non-confirmation recent highs indicate a vulnerability to further consolidation within the overall trend.

UTX – United Technologies

XLI Weighting – 4.40%

• TREND – The long term uptrend is in jeopardy.  The uptrend from the 2009 lows has been broken to the downside and the stock is now testing a line of support from the 2009 breakout.  The intermediate trend is currently down with decent momentum behind it and a continuation below current support looks likely.
• A double topping pattern was triggered in July with a breakdown below the 2014 lows near $100 which should now act as resistance.

UNP – Union Pacific

XLI Weighting – 4.33%

• TREND – The long term uptrend has reversed with the trend line from the 2009 lows broken to the downside and a follow through with a further breakdown below the 2013 lows.  The intermediate downtrend is now dominant and the 2009 trend line should act as resistance on any strength.

UPS – United Parcel Service

XLI Weighting – 3.82%

• The long term uptrend remains intact at this time with the 2009 trend line being tested.
• The breakdown of the current range was unconvincing in terms of volume.  The real test will be the trend line.

DHR – Danaher Corp

XLI Weighting – 3.28%

• TREND – the long term uptrend remains intact and the uptrend remains persistent.
• The August lows near $84 is key support.
• The non-confirmation of recent highs in the RSI leaves the stock vulnerable to consolidation/correction.

LMT – Lockheed Martin

XLI Weighting – 3.21%

• TREND – long term uptrend remains intact.
• Non-confirmation of recent highs is the RSI leaves the stock vulnerable to correction/consolidation.

GD – General Dynamics

XLI Weighting – 2.52%

• TREND – the long term uptrend remains intact.  However, an intermediate downtrend could be developing as the August lows are in jeopardy.  There is quite a bit of room for this to correct without any real damage to the long term trend.

Notes on US Sectors – XLY Consumer Discretionary

S&P Sector Weighting – 12.56% for Consumer Staples

Price Action – Bullish trend intact.  Some signs the trend is a bit extended.

Consumer discretionary stocks have been some of the best performing stocks in 2015.  Lower oil prices and interest rates along with a stable economy and favorable employment data in 2015 have been good for consumers.

Consumer discretionary stocks have significantly outperformed the S&P 500 throughout the course of the bull market.

Looking at the charts it appears that we are beginning 2016 with the long term trends intact but are looking a bit extended at this point and may need to consolidate/correct a bit in the near term.  So far there isn’t a lot to point to suggest these long term trends are ready to reverse.  The August lows will be important levels to watch should pull back further.

XLY – Consumer Discretionary

XLY Weekly Chart

• TREND – The long term uptrend from the 2009 lows is intact.  The uptrend line from the 2011 lows is being tested.
• The August 2015 lows near $70 is key trend support.
• The RSI has been trending lower since 2013 as price has been making new highs creating a bearish divergence.  This serves as only a warning at this point that the trend may be a bit extended and may need to pause/correct a bit further.  A breakdown below $70 (new low) would trigger a sell signal.  However, the trend remains intact and dominant at this time.
• The XLY has greatly out-performed the SPX over the course of the bull market.

Top Holdings – AMZN, DIS, HD, CMCSA, MCD, SBUX, NKE, PCLN, LOW, TWX

AMZN – Amazon

XLY Weighting – 9.95%

• TREND – The long term uptrend from the 2009 lows remains intact.  The trend has accelerated significantly after an early 2015 breakout and remains above a steep trend line from the 2015 lows.  The rate of acceleration is sharp and likely unsustainable, but there is no clear signs to point to on the chart at this time that is is time to sell.
• High relative strength vs XLY.

DIS – Disney

XLY Weighting – 7.38%

• TREND – The long term uptrend remains intact at this time.
• The August lows near $93 is key trend support.
• The recent highs (Star Wars hype) failed at previous highs on a RSI divergence suggesting near term upward momentum was unsustainable/extended.
• DIS is now testing trend line support (from the 2011 lows).  A breakdown below the trend line and the $93 would trigger a double top pattern and signal more downside.

HD – Home Depot

XLY Weighting – 6.60%

• TREND – The long term and intermediate uptrend remains intact at this time.
• The August lows near $109 is key trend support.
• Recent highs were unconfirmed by RSI serving as warning that the trend could be a bit extended near term and may need to digest recent gains before the trend can achieve a more sustainable trend.

CMCSA – Comcast

XLY Weighting – 5.48%

• TREND – The long term uptrend remains intact at this time.  However there are some concerns regarding the intermediate term trend.
• An ending diagonal pattern has formed at 2015 highs.  A diagonal pattern that forms after a sustained uptrend that is subsequently broken to the downside is a fairly reliable topping pattern.  This pattern was formed on a bearish RSI divergence signaling an extended trend.  The stock put in a lower high following the breakdown through the lower boundary of the pattern adding to the concern that a deeper correction in the intermediate term could be forming.

MCD – McDonalds

XLY Weighting – 4.36%

• TREND – The long term uptrend remains intact.
• The big breakout in late 2015 came out of a solid base.
• May be slightly extended near term but the overall trend looks sustainable.

SBUX – Starbucks

XLY Weighting – 3.82%

• TREND – The long term uptrend remains intact. The intermediate trend has accelerated.
• The August lows down near $48 is key trend support.

NKE – Nike

XLY Weighting – 3.67%

• TREND – The long term uptrend remains intact.
• The August lows down near $50 is key trend support.
• RSI is signaling a bit of near term extension in the trend, but price has a bit of room to correct without any damage to the trend.

PCLN – Priceline

XLY Weighting – 3.07%

• TREND – The long term uptrend remains intact.
• The July 2015 lows near $1120 is near term trend support.
• The Jan 2015 lows near $1000 is key long term trend support.
• Recent highs came on a bearish RSI divergence signaling near term extension.  The shares have since corrected back into the consolidation area and have largely worked of the RSI divergence.

LOW – Lows

XLY Weighting – 2.82%

• TREND – The long term uptrend remains intact.
• The July 2015 lows near $66 is key trend support.
• RSI is signaling near term trend extension.

TWX – Time Warner

XLY Weighting – 2.58%

• TREND – The long term uptrend remains intact.  However the stock is now in an intermediate term downtrend.
• An ending diagonal topping pattern was formed at recent highs and has been broken to the downside triggering the sell signal.  The stock has since made a series of lower lows and lower highs.
• Near term resistance is above $71 and $77.
• Key trend support is at $60 and just above $50 (long term trend line)

 

Notes on Us Sectors – XLP Consumer Staples

S&P Sector Weighting – 9.72% for Consumer Staples

Price Action – Bullish

Consumer staples have been in a persistent uptrend since the bull market began in 2009.  The XLP has lagged the S&P through the course of the bull market but that could begin to change if investors rotate into more defensive sectors.

As we begin 2016 the long term uptrends remain intact and healthy overall. However,  the charts suggest further near term consolidation within the trend is likely.  The August 2015 lows are key trend support.

XLP – Consumer Staples

XLP Weekly Chart – S&P 500 is the orange line

• The long term uptrend from the 2009 lows remains intact.  Th August 2015 lows near $45 is key trend support.
• XLP have lagged the SPX over the course of the bull market.

Top Holdings – PG, KO, PM, CVS, MO, WMT, PEP, WAG, COST, MDLZ

PG – Proctor and Gamble

XLP Weighting – 11.57%

• The up trend from the 2009 lows remain intact.  However, he trend line from the 2009 lows has been broken to the downside and confirmed as resistance.  The 2012 lows down at $60 is key support for the long term trend.
• PG is in an intermediate downtrend with continued downside momentum.
• Poor relative strength vs XLP.

KO – Coca-Cola

XLP Weighting – 9.2%

PM – Phillip Morris

XLP Weighting – 7.66%

CVS – CVS Health Corp

XLP Weighting – 6.40%

MO – Altria Group

XLP Weighting – 5.97%

WMT – Walmart

XLP Weighting – 5.06%

PEP – Pepsico

XLP Weighting – 4.75%

 

COST – Costco

XLP Weighting – 4.06%

MDLZ – Mondelez Intl

XLP Weighting – 3.93%