Interest rates. Real estate. Financial stocks. High-yielding dividend-payers. Those are some of the ...
October 17 Buy Signals Get Stronger
10/29/2014 10:20 am EST
With approximately half the S&P 500 stocks reporting, earnings are coming in much better than expected, so MoneyShow's Tom Aspray takes a technical look at the market averages to see if a move to new highs is likely before a pullback.
The stock market continued to power to the upside Tuesday with over 1% gains in the Dow Industrials and S&P 500. Once again, the small-caps were even stronger as the Russell 2000 gained over 2.8%.
Even the beaten energy stocks joined the party as the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) was up 4.65% for the day. The Dow Transports made a new all time high as it closed well above the September highs.
With just about half of the S&P 500 stocks reporting, the earnings are coming in much better than expected. Before the start of the earnings, it was expected that earnings would only expand by 4.5% but, so far, they have expanded at a 6% rate.
The market internals were strong Tuesday with five times more stocks advancing than declining. The Friday, October 17 (see chart) short-term buy signals from the McClellan oscillator have been reinforced by the strong signals from the Advance/Decline lines.
Chart Analysis: The NYSE Composite closed above the 61.8% Fibonacci resistance level at 10,638 on Tuesday.
- The quarterly pivot stands at 10,789 with the daily starc+ band at 10,885.
- The daily downtrend, line a, is at 10,940 with the early September high at 11,108.
- The bearish divergence resistance in the NYSE Advance/Decline line, line b, was overcome last Thursday.
- The A/D line is now rising sharply but is still below the September high.
- The McClellan oscillator has surged to the upside after confirming the divergence on October 17.
- The move from -212 to Tuesday's close at +255 is a sign of strength.
- There is short-term support now at 10,501 and the 20-day EMA.
The Spyder Trust (SPY) closed very near the day's high and closed well above the quarterly pivot at $196.17.
- The September 19 high is at $201.90 with the daily starc+ band at $202.13.
- The preliminary projected monthly pivot resistance for November is at $203.91.
- The S&P 500 A/D line formed a bullish zig-zag formation last week and closed Tuesday at a new all time high.
- The A/D line is clearly acting stronger than prices, which is a bullish sign.
- The daily on-balance volume (OBV) is still acting weaker than prices as it is just testing its downtrend, line e.
- The OBV is just barely above its WMA.
- There is first support at $194.75 with the rising 20-day EMA at $192.76.
Next Page: Two More ETFs to Watch|pagebreak|
The PowerShares QQQ Trust (QQQ) gained 1.51% on Tuesday and it is now up 15.21% YTD according to Morningstar.com.
- The QQQ is now just below the September high at $100.56 with the daily starc+ band at $101.84.
- The quarterly projected pivot resistance is at $103.51.
- The Nasdaq 100 A/D line has moved well above the September highs.
- This confirms the break above the bearish divergence resistance, line c, on Tuesday, October 21.
- The A/D line is well above the now rising WMA.
- The daily OBV has overcome its negative divergence resistance at line b.
- The OBV is now well above its flattening WMA.
- The chart has initial support now at $197.80-$198.80 with the 20-day EMA at $97.16.
- The quarterly projected pivot resistance is at $116.58 with the early September high at $117.48.
- The Russell 2000 A/D line moved above its WMA on October 15.
- The A/D line has now broken through the downtrend from the early July highs, line d.
- The daily OBV has also overcome its longer-term resistance at line e.
- The weekly OBV is now just barely above its WMA.
- The daily and weekly relative performance are now above their WMAs.
- The chart has initial support at $112 with the rising 20-day EMA at $109.81.
What it Means: The Dow Jones Industrials A/D line also made a convincing new high on Tuesday, so only the NYSE A/D line is lagging prices. This cannot be ignored, so I am also watching the S&P 1500 A/D line, which is rising strongly but has also not yet made a new high.
I was looking for a mid-week pullback last Friday but the ability of crude oil to hold the $80 level on a closing basis and the strength in the energy sector is encouraging. A pullback is still a possibility if this afternoon's FOMC announcement has any surprises. This will be followed by the GDP report before the opening on Thursday.
However, the recent improvement in the daily market A/D lines does allow for a move to convincing new highs by the market averages before we get a decent pullback.
How to Profit: No new recommendation.
Related Articles on ETFS
Trade idea: As long as FXI trades below $49.85, then new short trade ideas can be initiated between ...
The probability of an equity market correction over the next few months is slim to none, so there co...
Trade idea: As long as LQD trades below $122.60, then new short trade ideas can be initiated between...