The Weekend Profit Navigator takes a look at the weekly charts of the major indexes and SPDR sectors. Key levels and trade locations are provided along with commentary to keep you on the right side of the trade.
General Market Outlook and Conditions
The market ( SPY and QQQ ) remained broadly resilient this past week as both stayed within their rather wide trading range. The same can not be said for IWM which broke down below key support this week.
The week had a risk off feel with oil having its worst week of the year and bond yields falling yet again. Both are signs that the markets are getting jittery over global growth. I expect persistent bouts of volatility with markets particularly susceptible to tweet and headline risk.
Let’s take a look at the weekly charts of the Indexes.
$SPY Weekly
Bullish Factors: Price remains above key support at $280 and the 40ema
Bearish Factors: Price broke the uptrend off the Dec 24 low which is bearish. Price is also in a short term downtrend with the RSI and PPO indicators giving early bearish looks.
Bottom Line: As long as prices stay above $280 all we can conclude is that the price action is a dip within the context of an upward move. If however, price moves below $280 and especially the 40ema, then a deeper correction is at hand. Expect a lot of chop between $280 -$290. A move above $290 marks a breakout and would favor new highs.
Trade Ideas: Given support is support until or unless broken, I don’t think there is harm in being bullish against $280, but I wouldn’t be married to it. The uptrend has been broken and much work needs to be done in order to recapture it. Therefore the technicals are in a precarious spot. A move below $280 would set a bearish tone and would favor lower prices. Be light on long positions and be ready to either hedge your long exposure w/ SPY puts, go net short or step aside it you are not comfortable shorting.
$QQQ Weekly
Price has established a trading range between $178 and $186.50. In a lot of ways, QQQ is similar to SPY in its technical action.
Bullish Factors: Price remains above key support at $178 and the 40ema
Bearish Factors: Price broke the uptrend off the Dec 24 low which is bearish. Price is also in a short term downtrend with the RSI and PPO indicators giving early bearish looks.
Bottom Line: As long as prices stay above $178 the bulls are fine to call the move a dip. If however, price moves below $178 decisively a test of the 40ema would be favored for starters. As long as price stays between $178 and $86.50 expect a lot of chop. Above $186.50 would favor a test of $189 and then new highs.
Trade ideas: If price takes out $178 decisively, prior BTD bulls, should reassess and reduce long exposure. Lot’s of “easy money” was made on the uni-directional move off the Dec 24th lows. Once it becomes clear a deeper correction is underway, I would not be surprised if a rush to the exit occurs. Watch $178 carefully. Also watch FAAMG. If the Titans of Tech remain resilient it will be tough to take down QQQ. If however those start to roll, it will be just as hard to save it.
$IWM Weekly
Bullish Factors: None
Bearish Factors: Price is printing lower lows and lower highs for 3 consecutive weeks and has lost support at $152. Price has also fallen below the 40 week ema which puts it on an official sell signal. Adding insult to injury the weekly PPO is also set to execute a bearish crossover. All bearish developments.
Bottom Line: In late summer / early fall 2018, IWM let the indexes down. In 2019 it was the weakest of the 3 indexes with the smallest bounce. Now it is rolling over. $148.50 is the next line of support ( off the daily chart ). To get this chart looking bullish price needs to push above 156.
Trade Ideas: Stay short against $152 and look for lower prices.
Let’s look at the sectors.
Sector Relative Performance
The graph below shows the sector performance relative to the SPY benchmark between Apr15 – May24. With Staples, Utilities and Real Estate being the leaders you can see the defensive posture of the market. If you’re bullish you want to see risk appetite in the offensive sectors and we are not seeing that.
$XLB – Materials
Bullish Factors: None
Bearish Factors: Price fell below key support and is below the 40ema. RSI has broken trend lower and PPO has put in a bear cross. This sector is flashing bearish across the board.
Bottom Line: $54 has been a good bull / bear toggle since last fall. I want to stick with it. Since price is below, I favor being bearish. If price were to recapture $54 and certainly if it recaptured the 40ema I’d moderate the bearish view.
Trade Ideas: Stay / get short against $54 with a stop just above. My first target is $52.
$XLC – Communications
Bullish Factors: Price has held key support and is well above the 40ema which puts the sector on fairly solid ground.
Bearish Factors: To my eye, price recently put in a double top at the recent highs. You can see there has been net selling volume for 4 consecutive weeks and the indicators are beginning to roll over.
Bottom Line: Bulls need to hold $48 or a test of the 40ema at $46.5 is favored.
Trade Ideas: $48 is the bull / bear pivot point. Above is objective to try a long with a tight stop but below I’d be inclined to get short and look for a 40ema test at $46.50.
$XLE – Energy
Bullish Factors: None
Bearish Factors: Energy is coming off its worst week of the year and crashed through support at $63.50. The indicators have rolled over and price is well below the 40ema. All bearish factors.
Bottom Line: Ultimately, I think XLE finds $58.50 which is the next key support levels. There will be rips n dips along the way but the trend is down. THe wild card of course is if Iran goes rogue and causes a major incident in the Gulf-region that spikes oil well above $80.
Trade Ideas: I missed the trigger at $63.50 so now I am looking for an entry. Price is in no man’s land at the moment. If you can stomach the possibility of a kick back rally to $63.50 get short now. A more conservative approach would be to hope for a back touch of broken support, get short, with a stop just above $64.
$XLF – Financials
Bullish Factors: Price has held above what I regard as the bull / bear pivot at $26.50 which has been a great spot to locate both bullish and bearish resides. Price is also above the 40ema which is bullish.
Bearish Factors: XLF never really threatened the prior high from Jan 2018 and has been printing lower highs since. The indicators are weak but finely balanced.
Bottom Line: This could go either way but one thing I am confident of is $26.50 being the key. Above is ok for bulls; below and bears will start “feelin it”. The fact that the 40ema also resides at $26.50 make that level even more important. One thing to note is the bifurcation of the index. Under the hood, insurers like $MET and $PGR are at the highs while banks are generally weak. Traders are encouraged to look under the hood at these two areas within XLF. Some issues are breaking out while other are breaking down.
Trade Ideas: If you’re long, stay long against $26.50 but if that fails I favor a move lower toward a first target of $25.25. Get short against $26.50 with a stop just above
$XLI – Industrials
Bullish Factors: Given all the trials and tribulations of $BA, $CAT, and $MMM price has been pretty resilient and still finds itself above the 40ema and key support at $73.50.
Bearish Factors: Price was unable to take out the prior highs and put in a triple top. Price broke the uptrend line off the Dec lows and has had 3 consecutive weeks of lower highs and lower lows which are all bearish. Like most of the other sectors, the RSI and PPO are soggy and drifting lower.
Bottom Line: Bulls hold the ball above $73.50 and need dipsters to come in and support price. $BA is a major component within XLI so it is a good barometer to be watched closely. Any tariff retaliation on $CAT / $BA would likely push this below support.
Trade Ideas: $73.50 is the bull bear pivot. Below and price would likely target a move to $70.50 which is next support. If you’re constructive / bullish, you could try a long against $73.50 but dont be married to it. Right or right out.
$XLK – Technology
Bullish Factors: Price well above key support at $72 and the 40ema which is well below. Indicators are soggy after 3 weeks of lower prices but major damage has been avoided.
Bearish Factors: PPO close to putting in a bear cross which is intermediate bearish.
Bottom Line: I view XLK as a key to the market. Big bearish ideas won’t materialize unless they break tech. Software has been resilient and although AAPL has been weak they have not broken it. Additionally MSFT remains as solid as ever. On the downside, semis have been very weak and are often seen as canaries in the coal mine. If price holds $72 it will be hard to break the market. If price loses the 40ema over the coming weeks, other sectors will likely be much lower.
Trade Ideas: I dont see a clean trade here. If price trades to $72 we will have a much cleaner look at either a long or a short depending on how market looks.
$XLP – Staples
Bullish Factors: Everything
Bearish Factors: Nothing
Bottom Line: This safe haven continues to attract inflows and print higher prices. Yes, the group is expensive but that is not a reason to sell. Price remains above trend off the Dec lows. Bulls are in full controls as long as price stays above $56.50. Until price breaks below $56.50 bulls are in full control.
Trade Ideas: With price at / near all-time highs I am not inclined to jump in. What I’d look for is individual names that are breaking higher from consolidation zones or have pulled back into a support area. With the sector being strong, IMO dip buying of individual names should prove to continue being the right play.
$XLU – Utilities
Bullish Factors: Everything
Bearish Factors: Nothing; All time highs
Bottom Line: With treasury yields falling money continues to flow into Utes as the search for yield rolls on. ( same holds true for XLRE which I dont cover ) Of course this will end badly, but not now.
Trade Ideas: Price is breaking out and targets $61 on a measured move basis. If you’re long, stay long and continue to raise your stops. If you’re not in, I think the same strategy as XLP will work. Hunt individual names that have either consolidated or have pulled back. I like that strategy over buying the index at all-time highs. There are names under the hood that offer more upside.
$XLV – Healthcare
Bullish Factors: Price is above thew 40ema which is bullish.
Bearish Factors: RSI and PPO are heading out of town and are weak. Price is below $90.50 which was key support and is now key resistance.
Bottom Line: Recently, the Medicare-for-all rhetoric has died down and price has stabilized. That said price still remains pinned below my Bull / bear pivot of $90.50 and downtrend resistance.
Trade Ideas: Above $90.50 and downtrend resistance, get long with a tight stop. Look for $92.50 as a first upside target. With either a back touch of $90.50 and rejection, or if price loses the 40ema at $89 get short with a stop just above your entry. The downside target would be $85. Unless / until price takes out $90.50 the bias should be bearish IMO.
$XLY – Consumer Discretionary
Bullish Factors: Price is above $112 key support and well above its 40ema. Both bullish factors. They’ll have a hard time cracking this one unless that crack AMZN which is nearly 25% of this cap-weighted sector.
Bearish Factors: 4 weeks of selling is impacting the indicators which are rolling over. Additionally, price dropped well below the uptrend line off the Dec lows which is bearish. The marginal breakout and subsequent move of price back below looks like a classic failed breakout / bull trap.
Bottom Line: This is an important offensive sector that is a good proxy for gauging risk on / risk off sentiment. $112 is setting up as a battleground level. Above is fine if bulls hold it. Below and things will get iffy.
Trade Ideas: Use $112 as your bull / bear pivot. That is the next area of interest and objective location to try either a long or short. Now, price is in no man’s land with no line to shoot against. If price were to go higher and take out $117, get bullish / go long. New highs would be favored.
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Notes:
The charts are and levels are provided as well-informed guidelines. That said, please be aware that exogenous events like surprise tariffs or other events can easily move price through support / resistance zones.
Also, set you stops according to your own risk tolerance. The ones I have provided are to be used only as a guide. The most important aspect of your stop is to honor them. Some trades work, some don’t. Honoring your stop will ensure your loss on a failed trade will be minimal.
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