From Friday’s analysis of the large, mid–cap, and small–cap ETFs, it does appear that the mid–cap stocks are taking over leadership from the small caps. Therefore, this is one area I will be looking at for new opportunities. I also pointed out that the overall market had not given any sell signals, and Friday’s action certainly did not change this view..
The weekly chart of the NYSE Composite goes back to 2004, and shows the bullish divergence in the weekly Advance/Decline line at the March 2009 low. The weekly trading channel goes back to 2011, with the upper boundary (line a) now at 9,492. This is about 6% above current levels
There is also resistance from 2008 at 9,694. One can also see that prices are well above the rising 20–week EMA at 8,444, consistent with an overbought market. This week, the Starc+ band will be at 9,106. The rising 20–day EMA is at 8840 and represents the first real daily support, with additional chart support in the 8674–8740 area.
The long–term view of the NYSE Advance/Decline shows that it is acting much stronger than prices, as it is already well above the highs made in 2007–2008, even though prices are not. More importantly, it shows a clear pattern of higher highs (line c). It has recently also broken out of its trading range.
The long–term uptrend (line d), is derived from the multiple bullish divergences that formed at the March 2009 lows. Neither the weekly nor daily A/D line shows any signs yet of a top.
The Spyder Trust (SPY) stalled for a few days at $150.70, which was the equality target, but surged higher last Friday to $151.57.. The longer–term trend line resistance (line e) is now at $153.12, with the quarterly R2 resistance at $155.10.
The S&P 500 Advance/Decline line, like the price action, shows a very sharp uptrend, with new highs again on Friday. This does allow for further price gains over the next week or two.
There is minor chart support now at $149.60, which was last Thursday’s low, with the 20–day EMA at $148.22. This is about 2% below Friday's close. There is further support at $146.52 to $147.30.
The SPDR Diamond Trust (DIA) came very close to the $140 level last week, and closed well above the quarterly R1 resistance at $138.80. The trend line that connects the May and September 2012 highs (line d) is now being tested.
The weekly Starc+ band is at $141.50, with the monthly at $147.92.
The Dow Industrials A/D line broke out new highs last week as resistance (line f) was overcome. It came close to its WMA last week, and has once again turned higher.
There is first support now at $137.50 to $138, with the rising 20–day EMA at $136.61.
The PowerShares QQQ Trust (QQQ) has been locked in a fairly tight range for most of 2013. It has tested its 20–day EMA several times over the past two weeks. The quarterly pivot at $66.10 has been holding.
Friday’s action was a bit more positive, but there is still strong resistance at $68.32. It would take a close above the early October high at $69.80 to get the market’s attention.
The Nasdaq–100 A/D line has continued to improve. After breaking through its resistance (line b), it pulled back to its rising WMA before turning higher. This is a bullish formation.
The 20–day EMA is now at $66.86, and has not changed much in the past week.
The iShares Russell 2000 Index (IWM) retested the breakout level (line c) last week before surging to new highs. Both the equality target (calculated from the November low to the December high) and the quarterly R1 are in the $90.45 to $90.60 area, which is where IWM closed. The quarterly R2 resistance follows at $94.06.
The Russell 2000 A/D line has overcome stronger resistance (line e) that goes back to April 2012, and has also turned up from its WMA. It looks quite strong.
There is support for IWM now at $88.60 (line c), and the rising 20–day EMA is at $88.32.
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