bullbearinvestor.com

Tuesday - May 02, 2006

RTH Challenges Resistance

Can Retail recover? The Retail HOLDRS (RTH) got a lift from Wal-Mart yesterday and gapped up for the second time in two weeks. The move off support is positive and allows for the third fan line to be drawn. For now, I view this as a consolidation (gray oval) after the support break at 97.5 in mid April. The stock established resistance at 98 and needs to close above this level for this bounce to be taken seriously.

By Arthur B. Hill - Tue 02-May-06 at 07:34AM in Industries
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RTH Breadth Still Trending Lower

Despite a bounce in RTH, the AD Volume Line is still trending lower and has yet to break above the trendline extending down from the March high. The AD Volume Line represents the large-caps within the ETF (WMT, HD, LOW, TGT and WAG). These five stocks make up over 60% of the Retail HOLDRS (RTH). This leaves less than 40% for the other 13 stocks. The top five are often the volume leaders and this drives the AD Volume Line. The indicator peaked in March and moved lower the last six weeks. I would look for a break above the upper trendline and late April high before turning bullish on breadth and the stock. This chart is updated every day at ETFInvestmentOutlook.com (click here)

By Arthur B. Hill - Tue 02-May-06 at 07:34AM in Industries
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Tuesday - April 18, 2006

Retail HOLDRS (RTH) Breaking Down

After a support break last week, the Retail HOLDRS (RTH) is leading the way lower again this week. The breakout at 99 failed miserably with a bearish engulfing on 7-Apr and a break below the April low. This group is showing relative weakness and this bodes ill for the Consumer Discretionary sector and the S&P 500. RTH would need to bounce back above 98 to undo the technical damage of the last six days.

By Arthur B. Hill - Tue 18-Apr-06 at 10:26AM in Industries
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Transports Suffer Setback

Despite rising oil prices, the Dow Transports has been one of the best performers in 2006 with a 15% move from the January low to the April high. The Average was dealt a big setback over the last seven days and is challenging support from the October trendline. So far this pullback is considered a correction within a bigger uptrend. I am marking support at 4500 and a move below this level would suggest that a bigger trend change is in the works.

By Arthur B. Hill - Tue 18-Apr-06 at 10:25AM in Industries
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Wednesday - April 12, 2006

Internet Stocks Cannot Hold Gains

Techs are holding up better than the broader market right now, but the Internet HOLDRS (HHH) looks poised to break flag support. The stock worked its way higher the last few weeks, formed a bearish engulfing on Friday and broke minor support at 57.8 yesterday. Further weakness below 57 would break the lower flag trendline and this would weigh on the Nasdaq.

By Arthur B. Hill - Wed 12-Apr-06 at 07:14AM in Industries
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Retail Gets Slammed

Weakness in the broader market can be blamed on retail ($70 oil). The Retail HOLDRS (RTH) failed to hold last week’s gap and moved sharply lower the last three days. The falling flag breakout at 99 failed to hold and I must now consider a more bearish pattern. The blue trendlines show a rising wedge. The stock broke the lower trendline, formed a lower high on Friday and broke support Tuesday. This is bearish for retail, and the Consumer Discretionary sector.

By Arthur B. Hill - Wed 12-Apr-06 at 07:14AM in Industries
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Tuesday - April 11, 2006

A Homebuilder Harami

Watch the Homebuilders SPDR (XHB) for clues on when rates will hurt. The stock formed a harami with the long white candlestick and smaller white candlestick last week (Wed-Thur). The last three days have been inside days and a break from the current consolidation holds the short-term key. A move above 46.5 would signal a continuation of the 5-Apr gap and be bullish. A move below 44 would confirm the harami and trigger a bearish signal.

By Arthur B. Hill - Tue 11-Apr-06 at 06:19AM in Industries
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Friday - April 07, 2006

Retail Gap

Despite rising gold and oil, the Retail HOLDRS (RTH) managed to break falling flag resistance. I pointed out RTH on Tuesday with the long black candlestick and 62% retracement. I noted that this was a good spot for a reversal or some firmness and the stock obliged with piercing pattern, gap and break above the upper flag trendline. This is positive price action for retail and the Consumer Discretionary sector.

By Arthur B. Hill - Fri 07-Apr-06 at 06:40AM in Industries
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Broadband Breakout

In sharp contrast to the Biotech HOLDRS (BBH), the Broad Band HOLDRS (BDH) broke resistance at 21 and this group continues to lead the Nasdaq and broader market. This index looks a lot like the Networking Index and includes heavy weights like QCOM, MOT, GLW, BRCM and SFA, which Cisco just bought.

By Arthur B. Hill - Fri 07-Apr-06 at 06:34AM in Industries
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Tuesday - April 04, 2006

Retail Stocks Drag Cyclicals Lower

Weakness in the Consumer Discretionary SPDR (XLY) stems from weakness in the Retail HOLDRS (RTH). Wal-mart, Target and Best Buy led this group lower yesterday. RTH broke the lower trendline of a rising wedge and fell sharply yesterday. A falling flag has taken shape and the decline below 98 retraced 62% of the mid March advance (96.5-101.5). This is a good spot for a reversal or some firmness. A move above 99 would break falling flag resistance and this would be bullish for XLY and SPX.

By Arthur B. Hill - Tue 04-Apr-06 at 10:42AM in Industries
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Higher Energy Means Less to Spend

The Retail group and Consumer Discretionary sector seem to be adversely affected by strength in the Energy and Natural Resource groups. While the Dow and S&P 500 have corrected, the Natural Resources iShares (IGE) broke above resistance at 95. However, the going has gotten tough with a doji, black candle and shooting star the last three days. Broken resistance turns into support at 95 and a break below this level would throw cold water on the bulls.

By Arthur B. Hill - Tue 04-Apr-06 at 10:41AM in Industries
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REITs Feeling Interest Rate Heat

We have already seen the Utility SPDR (XLU) break down and it looks as if the REIT iShares (ICF) will be next. The stock formed a dark cloud pattern last Thursday and declined sharply on Monday. A break below the October trendline and late March low would be bearish with a downside target around 78. Interest rate sensitive stocks are not the place to be right now.

By Arthur B. Hill - Tue 04-Apr-06 at 10:40AM in Industries
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Friday - March 31, 2006

BBH Firming at Support

The Biotech HOLDRS (BBH) is firming just above key support at 190 and a triangle has taken shape over the last few weeks. This is a neutral pattern dependent on a break to establish a directional bias. A break below 190 would signal a continuation of the Nov-Feb decline and be quite bearish. Should the index hold support, a breakout at 200 would be bullish. That seems a long ways off though and more aggressive traders may want to focus on the harami that formed this week (long black candlestick and smaller white candlestick). This is a potentially bullish candlestick reversal and a move above 195 would start a move higher within the triangle.

By Arthur B. Hill - Fri 31-Mar-06 at 05:17AM in Industries
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Tuesday - March 28, 2006

Transports Ignore Rising Oil

Despite a continuing bull run in oil, the Dow Transports is hitting new all time highs. First it was truckers, then the airlines rebounded from the abyss and now the rails are hitting new highs. The only potential weakness here is the overbought condition of the Average. Transports stocks are not concerned about high fuel prices and this implies that economic strength outweighs the high price of oil.

By Arthur B. Hill - Tue 28-Mar-06 at 05:08AM in Industries
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Thursday - March 23, 2006

Inverted Hammers for HHH

The Internet HOLDRS (HHH) formed inverted hammers on Monday and Tuesday. A small white candlestick formed on Wednesday and the stock actually showed some relative strength. The stock is clearly oversold and firming, but not showing enough strength to forge a reversal yet. Traders should watch for a break above 58 to confirm the inverted hammers and stoke the Nasdaq bulls.

By Arthur B. Hill - Thu 23-Mar-06 at 09:31AM in Industries
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Semis Trying to Firm

The Semiconductor HOLDRS (SMH) is firming near the lower trendline of a falling price channel. After a sharp decline last Thursday, the stock firmed over the last three days. A move above 37 would recoup broken support and break the mid March high. This would be short-term bullish. If SMH and HHH breakout, then the Nasdaq would surely rally. That is still a big “if” though.

By Arthur B. Hill - Thu 23-Mar-06 at 09:30AM in Industries
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Tuesday - March 21, 2006

Something’s Got to Give

The iShares ~20-year T-Bond Fund (TLT) is headed down and the iShares REIT ETF (IYR) is headed up. And I thought that REITs were interest rate sensitive. REITs are looking at something else or they are in for a big surprise. The iShares ~20-year T-Bond Fund (TLT) broke support at 89.7 with a number of gaps in early March. This is bearish for bonds and bullish for rates (up). REITs are rising along with rates and the iShares REIT ETF (IYR) remains in a clear uptrend. It would take a move below 70 to reverse this uptrend. However, as long as TLT moves lower (rates higher), I would be skeptical of recent strength in REITs.

By Arthur B. Hill - Tue 21-Mar-06 at 02:49PM in Industries
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Wednesday - March 08, 2006

Internet Remains Weak

The Internet HOLDRS (HHH) remains the weakest of the Nasdaq groups. There is some support around 57 from the February low, but this no reason to turn bullish. At the very least, I would like to see a move above last week’s high at 60 before considering a bottom pick. As long as 60 holds, the Nasdaq is not going anywhere.

By Arthur B. Hill - Wed 08-Mar-06 at 06:07AM in Industries
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Software and Semis Form HS Patterns

The Software HOLDRS (SWH) has a head-and-shoulders reversal pattern working since December and neckline support at 36 holds the key. The pattern is just a consolidation now, but a move below 36 would turn the medium-term trend bearish. This would weigh on the Nasdaq. The Semiconductor HOLDRS (SMH) also has a head-and-shoulders working with neckline support at 36.5.

By Arthur B. Hill - Wed 08-Mar-06 at 06:05AM in Industries
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Monday - March 06, 2006

Resolution of the Range

Is it any wonder that the major indices are on a road to nowhere? The chart above shows the Consumer Discretionary SPDR (XLY) and is 2+ week trading range. There have been a number of fits and starts, but no break either way. This is the most economically sensitive sector and XLY also has a high correlation to the S&P 500. Therefore, the S&P 500 is unlikely to move higher unless this key sector breaks resistance.

There are three groups dragging their feet within the Nasdaq. The Internet HOLDRS (HHH) led the way down until early February and then moved into a consolidation pattern the last few weeks. While the Nasdaq moved slightly higher the last few weeks, HHH remains range bound and needs to break 61 to revive the bulls.

It’s been a right awful mess for the Semiconductor HOLDRS (SMH). AMD is pulling the group higher and INTC is dragging the group lower. Given the carnage in Intel the last two months, this ETF is actually holding up quite well. Nevertheless, it has yet to break resistance and end the five week trading range. A small pennant or flag formed over the last two days and a move above 39 would be most bullish.

The Software HOLDRS (SWH) makes up the last piece of the going nowhere puzzle. This ETF surged at the end of January, but failed to hold these gains and moved into a trading range. It has been one flat pancake the last four weeks. Watch 37.6 up and 36.5 down.

These are the four to watch for signs of strength or weakness in the S&P 500 and Nasdaq. The Nasdaq has been pulled higher by the Networking iShares (IGN) lately and could use a little help from its friends. Should two of the Nasdaq groups break resistance, this would be most bullish and also give a lift to the S&P 500.

By Arthur B. Hill - Mon 06-Mar-06 at 09:56AM in Industries
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Thursday - March 02, 2006

Networking Leads Nasdaq Higher

The Networking iShares (IGN) moved to a new high yesterday with a breakout at 35. Question: How could we see this coming? Answer: Relative strength. In mid February, the Nasdaq (red line) moved to a 4 week low. In contrast, the Networking iShares (IGN) held most of its gains and consolidated near its January highs (blue line). The black vertical line shows mid February low for the Nasdaq. IGN held up much better than the Nasdaq. When the Nasdaq finally did bounce over the last few weeks, IGN was close to resistance already and showing good relative strength. Yesterday’s surge in Cisco provided the catalyst and IGN is breaking out to new highs.

By Arthur B. Hill - Thu 02-Mar-06 at 06:51AM in Industries
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Wednesday - March 01, 2006

Too Late to Blame it on Google

The Nasdaq and the Internet HOLDRS (HHH) have been sick long before the Google warning yesterday. This is just the icing on the cake. Google is trading near a support zone and key retracement, but needs to recover from yesterday’s losses to reverse the Jan-Feb downtrend.

Yahoo! peaked in early January and Google peaked in mid January. Both stocks have been moving lower ever since. While Google managed to bounce a couple times, Yahoo and the Internet HOLDRS (HHH) were not so lucky. These two just firmed for a while and then continued lower. Note: Google is not part of the Internet HOLDRS (HHH).

Yahoo! and the Internet HOLDRS (HHH) led the Nasdaq higher from September to November. Now, they are dragging it lower and I would not expect a serious rebound in tech stocks until the big internet players turn it around. Yahoo! is trading near support from the prior lows and February trendline. After firming the last few weeks, the stock got knocked again yesterday. As long as 34 holds, I would not take a bounce in the Nasdaq seriously.

The Internet HOLDRS (HHH) chart looks pretty much the same as the Yahoo! chart. The stock firmed after the February gap, but could not hold the gains above 61. Yesterday’s fall reinforces this resistance level and it would take a move above 61 to revive the internet horses and the Nasdaq.

By Arthur B. Hill - Wed 01-Mar-06 at 06:17AM in Industries
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Thursday - February 09, 2006

Cisco Powers the Internet Architecture HOLDRS (IAH) higher

Led by a big move in Cisco, the Internet Architecture HOLDRS (IAH) stole the show yesterday. The stock broke resistance in November and returned to broken resistance in late October and early February. Broken resistance turned into support and the stock gapped higher yesterday. This gap solidifies support and opens the door to further strength above 38. This gap better hold and a move below 35 would be most bearish.

By Arthur B. Hill - Thu 09-Feb-06 at 07:21AM in Industries
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Wednesday - February 08, 2006

The Biotech HOLDRS (BBH) Fails to Hold Gap

The Biotech HOLDRS (BBH) gapped higher last week, but failed to follow through and filled the gap yesterday. This is negative and keeps the falling price channel in play. Even though BBH has potential support in the low 190s from the 62% retracement and late January lows, there are no signs of sustainable buying pressure. The stock needs to move above key resistance at 202 to reverse this downtrend.

By Arthur B. Hill - Wed 08-Feb-06 at 09:40AM in Industries
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The Internet HOLDRS (HHH) Is Way Oversold

The Internet HOLDRS (HHH) is clearly in the falling knife category, but the stock is also entering a support zone around 60. The current decline (71-59) has created an oversold condition and there is support around 60 from the prior consolidation (gray oval). Making a play here is gutsy to say the least, but a bounce back to broken support around 65 is plausible.

By Arthur B. Hill - Wed 08-Feb-06 at 09:40AM in Industries
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The Retail HOLDRS (RTH) is Still Falling

The Retail HOLDRS (RTH) remains a major drag on the S&P 500. RTH surged in November and the corrected over the last two months. I say correction, but there is no end in sight. Well, the end is in sight, but the stock is not showing any signs of buying pressure. The decline formed a falling wedge, which is potentially bullish. However, the falling wedge requires confirmation with a breakout and the stock would need to move above 98 for the bulls to regain the upper hand. RSI continues to work its way lower and would need to move above 50 for momentum to turn bullish.

By Arthur B. Hill - Wed 08-Feb-06 at 09:37AM in Industries
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Tuesday - February 07, 2006

The B2B Internet HOLDRS (BHH) Hold Strong

Given the decline in the Nasdaq and Internet HOLDRS (HHH) over the last few weeks, the B2B Internet HOLDRS (BHH) is holding up quite well. The stock surged above resistance in late January and then consolidated the last two weeks with a small falling wedge. The stock moved higher again yesterday on good volume and I would stay bullish as long as the gap holds (2.4). This is a low priced stock with above average risk.

By Arthur B. Hill - Tue 07-Feb-06 at 08:30AM in Industries
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Friday - September 30, 2005

Regional Bank HOLDRS Form Bullish Engulfing

The Regional Bank HOLDRS (RKH) has been one of the worst performing groups in September, but found some support with a bullish engulfing on Thursday. However, the bulls best wait to see if the stock can follow through with a break above 132.5 before getting excited.

By Arthur B. Hill - Fri 30-Sep-05 at 08:17AM in Industries
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Software HOLDRS Locked in a Range

As the single biggest industry group in the Nasdaq, Software exerts a lot of influence and should be watched clues on Technology in general. The Software HOLDRS (SWH) formed a triangle that extends back to the late June low. This neutral pattern shows a lot of indecision and I will be watching 37 for an upside breakout and 35 for a downside break.

By Arthur B. Hill - Fri 30-Sep-05 at 08:17AM in Industries
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Internet HOLDRS Surge

The Internet HOLDRS (HHH) formed a falling price channel from early August and broke above the upper trendline with a long white candlestick on Thursday. As long as Thursday’s gains hold (58.5), this breakout rules the chart.

By Arthur B. Hill - Fri 30-Sep-05 at 08:16AM in Industries
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Tuesday - September 20, 2005

Retail Remains Weak

I have noted weakness in the Retail HOLDRS (RTH) and it continues to plague the Consumer Discretionary. The S&P 500 is holding up relatively well, but relative weakness does not inspire confidence. RTH formed five black candlesticks in a row and broke support at 94. On a break above 98 would reverse the downtrend in this key group.

By Arthur B. Hill - Tue 20-Sep-05 at 05:54AM in Industries
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Friday - September 16, 2005

Retail Drives Market Lower

Does this chart look familiar? It should. It looks pretty similar to the Consumer Discretionary SPDR (XLY) chart and weakness in retail is a big reason for weakness in XLY and the S&P 500. The Retail HOLDRS (RTH) broke support at 99 in mid August and declined to 95. The stock found support around 95 and bounced, but the move was relatively weak and a reaction high formed at 98 this week. As long as RTH remains below 98, I view this chart as bearish and would expect further weakness, which will weigh on XLY and SPX. Is this decline a mere correction of the Apr-Jul advance or the start of a bigger move down? While this may be unclear, one thing is clearly clear. Without a catalyst, we should expect this decline to continue. A bullish catalyst (break above 98) would bring the correction theory to the forefront and argue for at least a test of the early August high.

By Arthur B. Hill - Fri 16-Sep-05 at 02:31PM in Industries
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Regional Banks Look Weak

The Regional Bank HOLDRS (RKH) remains weak and the bigger pattern at work points to more weakness. The Apr-Jul advance formed a rising wedge and fell well short of the January high. Remember, the S&P 500 and Nasdaq surpassed their January highs and RKH shows relative weakness. The lower high and rising wedge make for a bearish pattern and the recent support break at 133 is bearish. The stock is not going quietly though and there is a lot of support around 135. Even so, I would expect lower prices (~125) over the next few months and would not entertain bullish thoughts unless the stock breaks above 137.

By Arthur B. Hill - Fri 16-Sep-05 at 02:30PM in Industries
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Tuesday - September 13, 2005

Oil Services

Oil has already fallen from its highs around 70, but the Oil Service HOLDRS (OIH) remains at relatively lofty levels. The stock surged at the end of August and then formed a doji on 1-Sep (red circle). This shows sudden indecision and the stock is getting resistance around 120. In addition, notice that Chaikin Money Flow is in negative territory and buying pressure has dried up. Most momentum oscillators also sport negative divergence over the last few weeks. The stage is set for a correction or consolidation and I see lots of support around 105.

By Arthur B. Hill - Tue 13-Sep-05 at 06:25AM in Industries
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Friday - September 02, 2005

Software Catches A Bid

The Software HOLDRS (SWH) could be the one to watch. This represents the biggest sector within the Nasdaq and features stocks such as MSFT, ORCL, SYMC, CA, SAP, ADBE and INTU. The stock has been zigzagging higher the last five months and recently “zagged” to trendline support. A bullish engulfing is taking shape this week and support at 35 is confirmed by the June lows. Confirmation of the bullish engulfing with a move above 36 would start another “zig” higher and target a move above the July high.

By Arthur B. Hill - Fri 02-Sep-05 at 03:12PM in Industries
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Thursday - September 01, 2005

Biotech Breakout

The Biotech HOLDRS (BBH) is doing it again. The stock gapped higher in mid July. This could have turned into an exhaustion gap, but the stock held the gap and established support at 186 in July. Yesterday’s pop on big volume reinforces support and signals a continuation higher. A move below 186 would negate this bullish signal.

By Arthur B. Hill - Thu 01-Sep-05 at 06:16AM in Industries
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Transports Find Support

Big moves are often followed by corrections. These corrections retrace 38-62% of the advance and often return to broken resistance levels or prior resistance zones. A key tenet of technical analysis is that broken resistance turns into support. In addition, corrections often trace out certain patterns such as falling flags or wedges.

Now that you have the back ground, we can apply some of this theory to the Dow Transports. First, there was a big surge from 3400 to 3800. Second, there was a correction that retraced 38-50% of the advance. Third, the Average is finding support near broken resistance. Fourth, the Average formed a falling flag. All the elements of a classic correction are there. Now we need a breakout. The bullish candlesticks are starting to form and a move above 3720 would forge a bullish breakout.

By Arthur B. Hill - Thu 01-Sep-05 at 06:16AM in Industries
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Is the Fed done?

I highlighted a bearish pennant in the iShares REIT ETF (IYR) on 25-Aug. However, the stock held support, gapped higher and broke resistance. This is one of the most interest rate sensitive groups and the breakout signals lower interest rates ahead. At the very least, it suggests the end of rising rates.

By Arthur B. Hill - Thu 01-Sep-05 at 06:14AM in Industries
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Tuesday - August 30, 2005

Material Support

Just as a bearish engulfing confirmed resistance, a bullish engulfing is confirming support for the Materials SPDR (XLB). The stock is oversold and at support. This makes the bullish engulfing all the more intriguing. However, follow through is what separates fluff from substance. Right now, this is just an oversold bounce at support. Follow through above 27.7 would confirm the bullish engulfing and argue for further strength.

By Arthur B. Hill - Tue 30-Aug-05 at 08:44AM in Industries
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Internet Architecture

This pattern is fairly typically among tech indices and stocks. There was a consolidation in June, a surge in July and a decline in August. The consolidation (gray oval) acts as support and the stock bounced off 34 twice this month. It is possible to draw a trendline extending down from mid July and there is resistance at 35.3 from last week’s high. A move above 35.3 would affirm support, break resistance and argue for further strength.

RKH broke below the lower trendline of a rising wedge and then consolidated (gray oval). Notice that broken support turned into resistance around 137 and this is the level to beat. A doji formed on Monday and the decline over the last two days solidifies resistance. There is support around 133, but I am not expecting it to hold.

By Arthur B. Hill - Tue 30-Aug-05 at 08:43AM in Industries
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Oil Services Not Impressed

Given the surge in oil prices on Monday, I would have expected bigger things out of the Oil Service HOLDRS (OIH). The stock opened strong, but failed to maintain gains and closed weak. The resulted in a black candlestick and a rising flag has taken shape over the last eight days.

These are potentially bearish consolidations and a move below 112 would signal a continuation lower. The downside target would be the support zone around 100-105. Careful with this one as the big trend is clearly up and further weakness would still be deemed corrective.

By Arthur B. Hill - Tue 30-Aug-05 at 08:43AM in Industries
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Monday - August 29, 2005

Semis Fail to Hold Breakout

Because of its importance to the Nasdaq, I regularly cover the Semiconductor HOLDRS (SMH). The stock formed a falling flag and found support around 36. There was even a breakout attempt last week that failed miserably as the stock closed below 36.5 on Wednesday. The stock went on to break the late April trendline and looks vulnerable to further weakness. The high at 37.15 is now the resistance level to beat. As long as this level holds, I stay bearish on SMH and this will weigh on the Nasdaq.

RTH led the market higher in May, June and July with an impressive 20% move. This could be the back-to-school rush into retail. The stock peaked in late July and gapped lower in August. A falling flag has taken shape over the last 4 weeks and I would remain bearish as long as the upper trendline and resistance at 99 hold. The stock is approaching support and getting oversold, but a reversal is out of the question as long as 99 holds.

By Arthur B. Hill - Mon 29-Aug-05 at 07:23AM in Industries
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REITs follow Finance

On 25-Aug, I showed a chart of the Regional Bank HOLDRS (RKH) breaking down. This is obviously an interest sensitive group and so are REITs. The iShares REIT ETF (IYR) gapped down and fell sharply in early August. This move created an oversold situation that needed to be alleviated. This can be done with a flat consolidation or a bounce. IYR got a little of both and formed a pennant over the last 2-3 weeks. These are continuation patterns and a move below 63 would signal a continuation lower.

RKH broke below the lower trendline of a rising wedge and then consolidated (gray oval). Notice that broken support turned into resistance around 137 and this is the level to beat. A doji formed on Monday and the decline over the last two days solidifies resistance. There is support around 133, but I am not expecting it to hold.

By Arthur B. Hill - Mon 29-Aug-05 at 07:22AM in Industries
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Networking Trouble

Corning (GLW), Motorola (MOT) and QualCom (QCOM) have made the Networking iShares (IGN) one of the top performing ETFs over the last few months. The uptrend remains, but IGN is having trouble around 30 as bearish candlesticks form. A bearish engulfing and a shooting star formed over the last few weeks (red ovals). These require confirmation and a move below 29.2 would do the trick. As long as last week’s low holds, the candlesticks are not confirmed and this is just a consolidation.

By Arthur B. Hill - Mon 29-Aug-05 at 07:21AM in Industries
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Thursday - August 25, 2005

Blame Retail

The Retail HOLDRS (RTH) can be blamed for recent weakness in the broader market. This group is an important part of the Consumer Discretionary sector, which is the most prone to economic fluctuations. As such, it should be watched for early clues on economic strength or weakness.

RTH led the market higher in May, June and July with an impressive 20% move. This could be the back-to-school rush into retail. The stock peaked in late July and gapped lower in August. A falling flag has taken shape over the last 4 weeks and I would remain bearish as long as the upper trendline and resistance at 99 hold. The stock is approaching support and getting oversold, but a reversal is out of the question as long as 99 holds.

By Arthur B. Hill - Thu 25-Aug-05 at 09:53AM in Industries
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Banks Breaking Down

The Finance sector is the largest sector in the S&P 500 (~20%) and Regional Banks are part of this sector. The Regional Bank HOLDRS (RKH) peaked in mid July with a bearish engulfing and started leading the way lower. The Nasdaq and S&P 500 peaked on 3-Aug and relative weakness in banks was not a good sign.

RKH broke below the lower trendline of a rising wedge and then consolidated (gray oval). Notice that broken support turned into resistance around 137 and this is the level to beat. A doji formed on Monday and the decline over the last two days solidifies resistance. There is support around 133, but I am not expecting it to hold.

By Arthur B. Hill - Thu 25-Aug-05 at 09:53AM in Industries
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Tuesday - August 23, 2005

Semi Support

Yesterday I showed the Information Technology SPDR (XLK) trading right at trendline support and today I am showing the Semiconductor HOLDRS (SMH). This stock is also trading right at trendline support and formed a falling flag over the last few weeks. Semis were up on Monday and this is positive for the group and the Nasdaq. However, they cannot do it alone and further strength is required to signal a continuation of the Apr-Jul advance. I am looking for a move above 37.1 to confirm the flag and project an advance to the low 40s. As long as the flag falls, the downside target is around 35.

By Arthur B. Hill - Tue 23-Aug-05 at 07:16AM in Industries
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Tuesday - August 16, 2005

B2B Breakout

While the Nasdaq moved lower, the B2B Internet HOLDRS (BHH) gapped higher in early August and held the gap. The stock also broke resistance and consolidated over the last eight days. A move above 2.35 signals a continuation higher and a move below 2.2 starts to fill the gap.

By Arthur B. Hill - Tue 16-Aug-05 at 07:40AM in Industries
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Monday - August 08, 2005

Banks Lead Lower

Smarting from the recent rise in interest rates and visions of economic strength, the Regional Bank HOLDRS (RKH) gapped lower and broke support on high volume. This support break follows a bearish engulfing in mid July and the decline broke the lower trendline of a rising wedge. Note that I drew through the 7-Jul spike low, which occurred with the London bombings. The stock is already short-term oversold and broken support at 137 turns into resistance.

By Arthur B. Hill - Mon 08-Aug-05 at 08:25AM in Industries
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Tuesday - August 02, 2005

Retail Madness

The Retail HOLDRS (RTH) has been a top performer over the last three months. A rising price channel took shape and the trend is firmly bullish as long as the lower trendline holds.

The trend may be bullish, but the stock is up almost 20% without a correction and overbought by many metrics. There was a gap up on Thursday and the stock stalled the last two days. A spinning top formed on Monday and this shows indecision. A move below the lower trendline and support at 100 would break the uptrend and call for a retracement of the advance.

By Arthur B. Hill - Tue 02-Aug-05 at 08:21AM in Industries
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Banks Underperform

The Regional Bank HOLDRS (RKH) remains below its December high and is underperforming the broader market. The Nasdaq, S&P 500, S&P SmallCap Index and S&P MidCap Index (MID) have all moved to new highs for the year. Not so for RKH. The relative weakness in this group reflects interest rate tensions and a rising wedge has taken shape over the last few months.

The rising wedge is a bearish consolidation. However, the bulls have the upper hand as long as the wedge rises. Turning bearish at this stage would have a good risk-reward ratio, but also be a top picking exercise. A consolidation formed over the last two weeks and traders should watch 136.8 for the first signs of trouble. This could be confirmed with a support break in the Dow. A move below 136.8 would be negative and further weakness below 133 would be outright bearish.

By Arthur B. Hill - Tue 02-Aug-05 at 08:20AM in Industries
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Friday - July 29, 2005

Nasdaq Groups

This is an excerpt from today’s Daily Swing at TDTrader.com. I divide the Nasdaq 100 into five groups to see which are leading and which are lagging. The more the merrier. For example, when the Nasdaq 100 advances without help from Semis or Sofware, I become suspect. When the Nasdaq 100 advances with all groups participating, it shows broad strength and makes the advance more sustainable.

All five groups are in bull mode, but some signs of dissent are starting to emerge. The Semiconductor HOLDRS (SMH) is stalling and the Software HOLDRS (SWH) is looking vulnerable to a minor support break. Should SMH break minor support (see chart below), the Nasdaq 100 would likely retreat back towards 1600. The Biotech HOLDRS (BBH) and Networking iShares (IGN) are holding their own, but looking overbought and ripe for some backing and filling.

The Biotech HOLDRS (BBH) stalled yesterday, but the gap and minor support at 183 have yet to be challenged. The stock is still overbought and at channel resistance. This increases the odds of a sideways move or a correction.

For the Internet HOLDRS (HHH), I have added a gray trendline extending up from the early July low. The May gray trendline defined the upswing and the June gray trendline defined the downswing. The July gray trendline defines the current upswing. Watch this trendline and minor support at 58 for a reversal of this upswing.

The Semiconductor HOLDRS (SMH) is holding up progress. This group helped push the tech sector higher in May and early July. SMH is now consolidating with a flat flag and a break above 38 would signal a continuation higher. Conversely, a break below 36.5 would argue for a pullback towards the June resistance breakout and have consequences for the Nasdaq 100.

The Software HOLDRS (SWH) is also weighing on the Nasdaq 100 as the stock opened strong and finished weak. Weakness can be attributed to CA and MERQ. In addition, SYMC lowered its outlook due to foreign exchange issues and is down sharply after hours. A minor support break at 36.3 would argue for a pullback towards the falling flag breakout and blue trendline (35.5).

The Networking iShares (IGN) managed a small gain. The stock looks overbought, but shows no signs of weakness yet. Watch minor support at 28.5 for the first signs of trouble.

By Arthur B. Hill - Fri 29-Jul-05 at 06:17AM in Industries
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Thursday - July 14, 2005

Broadband Power Line

Speaking of Google, the company just made an investment in Current Communications. As the name suggest, this company offers broadband over power lines (BPL). Cinergy, ConEd and Duke Power are also looking into BPL. As if the baby bells (SBC, VZ, BLS) didn’t have enough trouble from the Cable Companies (CMCSA, CVC). Should the electric utility players roll out BPL in mass, look for even cheaper broadband and thinner margins at the regional bells.

By Arthur B. Hill - Thu 14-Jul-05 at 10:46AM in Industries
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Wednesday - May 11, 2005

Oil and Energy Stocks

A slowing economy translates into less demand for oil and this could be weighing on oil and Energy stocks. Oil could correct to the upper 40s and still hold its uptrend. In addition, I really wouldn’t consider a correction in oil bearish for Energy stocks as long as WTIC holds above 44. However, Wall Street has another opinion and a move to 44 in WTIC would mean more weakness in the Energy sector.

The Oil Service HOLDRS (OIH) formed a bullish harami (red caret) and the Energy SPDR (XLE) formed a hammer for Energy SPDR (XLE) last week. Both followed through on these candlestick reversals and have positive divergences in key momentum oscillators. However, Tuesday’s weakness showed just how frail these two groups are. In addition, Tuesday’s downside volume was above average in a number of Energy stocks. For OIH, RSI moved back below 50 and remains with lower highs for a downtrend. This is an RSI sell signal and further weakness below 90 would negate the candlestick reversal that formed last week.

By Arthur B. Hill - Wed 11-May-05 at 04:34PM in Industries
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Monday - May 02, 2005

Finance Leads the Way

The Finance and Utilities sectors are showing strength along with bonds. In fact, the Utility SPDR (XLU) closed at a 3 1/2 year high and remains the strongest sector in the market. The Finance SPDR (XLF) had its moments of weakness on Friday, but closed strong and remains in a short-term uptrend. Even thought the pattern could evolve into a rising flag, this should not be a concern as long as the flag rises and Friday’s low holds. Strength in the Finance sector bodes well for the broader market and also hints at lower interest rates, despite what the Fed says.

By Arthur B. Hill - Mon 02-May-05 at 08:42AM in Industries
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The Semi Key

For techs, the key lies with the Semiconductor HOLDRS (SMH) and the trading range remains in place. The stock pierced the lower end with a move below 30.30, but recovered with the rest of the market and formed a hammer doji combo on the day. This fits with the indecision of the trading range. The 19-Apr gap is still holding and a move above 31.6 would be bullish. At this point, a move below the mid April low (29.9) would fill the gap and signal a continuation lower.

By Arthur B. Hill - Mon 02-May-05 at 02:41AM in Industries
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Tuesday - April 26, 2005

Cable Versus Telecom

The Motley Fool (click here) likes SBC Communications. An investing article on 25-April highlighted the latest earnings report and stated that SBC was part of the Motley Fool Stock Advisor portfolio. The strengths for SBC reside in the big brand, the broadband rollout and the juicy dividend.

However, investors and traders seem to see something else. Namely, that SBC lost 500,000 access lines last quarter and still has the AT&T merger to digest. In contrast, Time Warner and Comcast have been adding thousands of new customers each quarter for voice-over-internet telephony. This is not a healthy trend and the cable companies are still getting the better of the old bells.

But we don’t need the numbers to tell us who is winning. The price charts show the winners all too clear. SBC and Verizon are trading near their 52-week lows and in clear downtrends.

In contrast, Comcast is trending higher and trading near rising trendline support.

Time Warner is not as strong, but remains well above its August low and is finding support near the February low.

By Arthur B. Hill - Tue 26-Apr-05 at 08:29AM in Industries
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Friday - April 08, 2005

Help, I need somebody!

The Semiconductor HOLDRS (SMH) is holding up relatively well in 2005, but the other tech groups remain down in the dumps (gray oval). The Internet HOLDRS (HHH) managed a bounce the last two weeks (red line), but more is required to boost the Nasdaq. With only one group showing good relative strength in 2005, the Nasdaq is caught in a tug-o-war and trading will remain choppy until at least two of these four groups align (bullish or bearish). With three of the four relatively weak, I consider current industry group action to be more bearish than bullish.

By Arthur B. Hill - Fri 08-Apr-05 at 11:01AM in Industries
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