Thursday - May 04, 2006
Breadth Oversold for IGN
The McClellan Volume Oscillator for the Networking iShares (IGN) has become oversold and traders should watch for a move into positive territory to trigger a bullish signal. The McClellan Volume Oscillator became oversold in August and October with a move below –100 (green ovals). Bullish signals were subsequently triggered when the McClellan Volume Oscillator moved from oversold to positive territory (blue ovals). The September signal was short-lived, but the October signal preceded a sharp advance. The McClellan Volume Oscillator moved below –100 in April more than once. This is why it is important to wait for bullish confirmation with a move into positive territory. Thus far the oscillator has yet to move into positive territory, but such a move would trigger a bullish signal. Also notice that IGN is trading at support from the April-05 trendline and Jan-Feb consolidation. ETFInvestmentOutlook.com
By Arthur B. Hill - Thu 04-May-06 at 10:45AM in Breadth
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Thursday - April 27, 2006
SMH and the McClellan Volume Oscillator
Yesterday I highlighted the Semiconductor HOLDRS (SMH) and the bullish crossover in the McClellan Oscillator. This indicator is based on the advance/decline statistics and the bullish crossover signals a move from negative territory to positive territory. I also look at the volume based McClellan Oscillator or McClellan Volume Oscillator. This is based on the percentage of volume in advancing stocks less the percentage of volume in declining stocks. Volume based breadth stats give more weight to large-cap stocks because large-caps typically have more volume. In contrast, regular advance/decline stats give more weight to small and madcap stocks. The Semiconductor HOLDRS (SMH) is heavily weighted towards the larger cap stocks as Intel, Applied Materials and Texas Instruments make up around 50% of this ETF. Just three 3 stocks (out of 20) account for the majority of the ETF’s price change.
The McClellan Volume Oscillator moved into positive territory on Wednesday (green circle) and the components of this ETF continue to show strength. SMH already broke its 50-day EMA (gray oval), but the McClellan Summation Index (volume based too) remains below its 20-day EMA (red circle). The big break for SMH will come when the McClellan Summation Index moves above its 20-day EMA. Stay tuned and checkout ETFInvestmentOutlook.com for the latest breadth charts (click here)
By Arthur B. Hill - Thu 27-Apr-06 at 12:07PM in Breadth
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Wednesday - April 26, 2006
Semis Coming to Life?
Each morning I review the breadth tables at ETFInvestmentOutlook.com. These sortable tables rank around 100 ETFs and Indices by the McClellan Oscillator, McClellan Volume Oscillator and changes in these oscillators. There is also an alert column to show when the McClellan Oscillator crosses into positive territory or negative territory.
In today’s table, the McClellan Oscillator for all three Semiconductor ETFs crossed into positive territory. In fact, these were the only ETFs/Indices with bullish crossovers. There were 14 ETFs/Indices with bearish crossovers. Keep in mind that that McClellan Oscillator is fairly sensitive and can gyrate above and below zero.
This is where the McClellan Summation Index comes in handy. The McClellan Summation Index is a cumulative measure of the McClellan Oscillator and it takes more than just one positive day to turn this indicator around. For the Semiconductor HOLDRS (SMH), the McClellan Summation Index moved above the 20-day EMA last week and this coincided with a trendline break in SMH (twice in fact). The trendline break is holding and I want to see more strength from the breadth stats to push the McClellan Summation Index into positive territory. This would turn the indicator bullish and I would then expect SMH to challenge its January high.
See ETFInvestmentOutlook.com for more details and charts (click here).
By Arthur B. Hill - Wed 26-Apr-06 at 12:12PM in Breadth
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Tuesday - April 25, 2006
RKH Breadth
This chart shows the McClellan Oscillator and McClellan Summation Index based on the stocks in the Regional Bank HOLDRS (RKH). The ETF recorded a new high last week, but the McClellan Oscillator and McClellan Summation Index are lagging behind. Both formed lower highs last week and the McClellan Oscillator moved into negative territory yesterday. This is not a good sign for RKH breadth and these indicators are not confirming Tuesday’s rally (green oval). Look for RKH to break its 50-day EMA to confirm weakness in these key breadth indicators and reverse the current uptrend.
Volume based breadth charts and new high/low breadth charts are also available for RKH at ETFInvestmentOutlook.com (click here)
By Arthur B. Hill - Tue 25-Apr-06 at 03:46PM in Breadth
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Monday - April 24, 2006
NDX Breadth Turns Sour
Was Tuesday’s big surge a fluke or the start of a new leg higher? The gains held Wednesday and Thursday, but the Nasdaq fell apart on Friday. AD Volume Net% moved below –50% for the fourth time this month (gray oval) and this is not a good sign at all. From a breadth standpoint, Tuesday’s surge failed big time. The McClellan Oscillator and McClellan Summation Index both moved into negative territory (red ovals). These bearish signals should not happen after such strength on Tuesday and this is bearish for breadth.
You can see breadth charts like this for 80+ ETFs at ETFInvestmentOutlook.com (click here)
By Arthur B. Hill - Mon 24-Apr-06 at 03:27PM in Breadth
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Saturday - April 15, 2006
New Site for ETF Breadth Charts
ETFInvestmentoutlook.com (click here)
I find breadth indicators and charts invaluable for analyzing the major indices, sectors, industry groups and ETFs. Breadth indicators provide a robust bottom-up approach to measure the inner workings of an ETF, sector or index. Equity based ETFs are made up of individual stocks. The Information Technology SPDR (XLK) features around 85 stocks from the technology sector. Breadth statistics measure the ups, downs, new highs, new lows and volume for each of these individual stocks. The results are then totaled to form aggregate breadth indicators. Think of these as the vital signs (pulse, blood pressure and breathing) that reveal underlying strength or weakness that is sure to enhance the analysis process. Check out ETFInvestmentoutlook.com (click here)
By Arthur B. Hill - Sat 15-Apr-06 at 03:34AM in Breadth
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Dow Oversold and At Support
The decline in the Dow Industrials over the last few weeks looks like a bull flag. This downward sloping flag is a potentially bullish pattern that requires confirmation with an upside breakout. Notice that the Dow formed a similar falling flag in late February and early March. The breakout at 11100 in early March confirmed this flag and led to a new reaction high. For the current flag, a break above 11250 would confirm the pattern and signal a continuation higher. The upside target would be the upper channel trendline or to the 11500-11600 area.
In addition to the flag, the Dow is trading at trendline support and the Ratio-Adjusted McClellan Oscillator is oversold. The Dow firmed over the last two days near support from the October trendline. This trendline has now been touched four times and a break would be quite negative. As long as this trendline holds, the trend since October is clearly up. The McClellan Oscillator dipped below –70 for the third time in five months (green circles). The prior oversold dips in December and January led to impressive bounces. The combination of trendline support and an oversold McClellan Oscillator increases the odds of a bounce as we head into earnings season.
By Arthur B. Hill - Sat 15-Apr-06 at 03:30AM in Breadth
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Tuesday - March 14, 2006
Nasdaq Net New Highs
The 10-day SMA for Nasdaq Net New Highs has been pretty good at calling the medium-term swings in the Nasdaq. The indicator broke down in August and this foreshadowed the summer decline. After plunging into negative territory in October, the indicator recovered and broke resistance in November to turn bullish again. Flash forward to March 2006 and the indicator is breaking down to flash a sell signal. The 10-day SMA broke the four month trendline, formed a lower high and moved below its prior low. This makes for a downtrend in new highs. However, the indicator is still above zero and positive overall. This may keep trading choppy and a move into negative territory would signal that the downtrend was picking up speed.
By Arthur B. Hill - Tue 14-Mar-06 at 09:34AM in Breadth
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Thursday - September 15, 2005
NDX AD Line
As the above chart illustrates, Nasdaq 100 breadth is not strong at all. The AD Line is a cumulative measure of advancing stocks less declining stocks. This AD Line is based exclusively on the 100 stocks in the Nasdaq 100. The AD Line followed the Nasdaq 100 higher in July, but not in early September. While NDX is challenging its early August high, the AD Line traded flat over the last few weeks and formed a large negative divergence. In addition, the AD Line broke support in late August and this tells me that fewer and fewer stocks are participating in the current rally. Rallies don’t go far when participation thins.
By Arthur B. Hill - Thu 15-Sep-05 at 11:17AM in Breadth
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NDX AD Volume Line
The AD Volume Line is even weaker because it broke support and remains below broken support. This indicator is a cumulative measure of the volume in advancing stocks less the volume in declining stocks. Unless both of these indicators can make it back above their 50-day SMAs, the outlook for breadth is bearish and this will ultimately weigh on the Nasdaq 100 and by extension the S&P 500. As Greg Morris asserts, “breadth is the footprint of the market”. The AD Line represents the rank-and-file and the AD Volume Line represents the large-caps. You know that selling pressure is picking up when both are deteriorating.
By Arthur B. Hill - Thu 15-Sep-05 at 11:17AM in Breadth
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Wednesday - August 17, 2005
SPX Breadth
The S&P 500 is a broader index and its AD Line has kept pace recently. The indicator moved to a new high in July and confirms strength in the underlying index.
Like the S&P 500, the indicator fell back over the last two weeks to test broken resistance and the 50-day SMA. With the new high recently and lack of a negative divergence, I don’t see any reason for alarm just yet. However, I could not and did not express the same opinion for the Nasdaq 100 AD Line. I will be watching the Aug-04 trendline for signs of material weakness in the AD Line for the S&P 500.
By Arthur B. Hill - Wed 17-Aug-05 at 05:57PM in Breadth
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NDX Breadth
The Advance Decline Line for the Nasdaq 100 is lagging. This line is a cumulative measure of advances less declines (daily). The indicator reflects the level of participation when the Nasdaq 100 moves higher or lower.
Participation in the May advance was broad and strong as the AD Line moved sharply high. However, participation in the July advance was not as strong as the AD Line stalled near the early June high (red line). The Nasdaq 100 easily broke its early June high and the AD Line has formed a negative divergence for all intents and purposes. This shows that fewer stocks partook in the July advance and this is not healthy. The AD Line went on to break the May trendline, 50-day SMA and is now poised to test support form the July low. Unless the AD Line can recover and move back above its 50-day SMA, my stance on breadth is bearish.
By Arthur B. Hill - Wed 17-Aug-05 at 05:57PM in Breadth
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Thursday - May 05, 2005
SPX and NDX Breadth
SPX breadth is stronger than Nasdaq 100 breadth. On Wednesday, the 10-day SMA for AD Volume Net% finished at +12% for SPX and +10% for the Nasdaq 100. Participation over the last 10 days is broader in the S&P 500 than the Nasdaq 100. The indicator broke the red trendline extending down from November and moved above its April high.
For the Nasdaq 100, the 10-day SMA for AD Volume Net% reached a prior resistance area around +10% (red line). The indicator reversed in early February, early March and early April. Here we are in early May. I consider the indicator bullish as long as it holds in positive territory. A move below zero would be negative.
Note: AD Volume Net% = ((Volume Advancing Issues – Volume of Declining Issues) / Volume of Total Issues).
By Arthur B. Hill - Thu 05-May-05 at 12:12PM in Breadth
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Friday - April 29, 2005
Breadth Gets Worse
For an idea of just how pervasive selling pressure has been, the Nasdaq AD Line is nearing its Mar-03 low. Even though the Nasdaq reached a new reaction high in January, the AD Line didn’t even come close to its prior high and techs have led the market lower this year.
Weakness is spreading. The NYSE AD Line broke below a long trendline extending up from the Mar-03 low as sellers broaden their campaign. Blame it on what you will, but techs are seriously weak and the broader market is starting to follow.
By Arthur B. Hill - Fri 29-Apr-05 at 12:29PM in Breadth
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Friday - April 15, 2005
Nasdaq AD Line
How bad is it in tech land? Just ask the Nasdaq AD Line. The S&P 500 and Nasdaq 100 AD Lines have largely mirrored the underlying indices over the last two years. However, the Nasdaq AD Line formed a large negative divergence and moved below its 2004 low this week. Whereas SPX represents 500 large-cap stocks and NDX represents 100 large-cap tech stocks, the Nasdaq represents over 3000 stocks. This includes the good, the bad, the ugly, the small, the medium and the large. Most of these stocks are small or medium size tech companies and relative weakness in this AD Line shows little or no appetite for the riskier or high-beta names.
By Arthur B. Hill - Fri 15-Apr-05 at 03:12PM in Breadth
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