Declining Momentum Continue Among The Five Major Equity ETFs Has Been A Warning

Richard Suttmeier

Washington politics, a stubborn Federal Reserve, a storm named Harvey and trigger-happy North Korea are weighing on the U.S. stocks this morning. Here’s how to trade them using exchange-traded funds as investors have been advised to reduce holdings by 50% on recent strength.

SPDR Dow Jones Industrial Average ETF (DIA)

Courtesy of MetaStock Xenith

The weekly chart for Diamonds ($217.94 on Aug. 28) will shift to negative this week if DIA closes Friday below its five-week modified moving average of $216.65. The ETF is its 200-week simple moving average or “reversion to the mean” at $179.80, last tested during the week of Feb. 12, 2016 when the average was $157.98. The 12x3x3 weekly slow stochastic reading is projected to fall to 75.40 this week falling below the overbought threshold of 80.00.

Investment Strategy: Buy weakness to my quarterly value level of $203.15. My semiannual pivot is $214.93. Strength has been failing between my semiannual of $214.93 and just above my annual pivot of $220.14. Sell strength to my weekly risky of $221.37, which is below the Aug. 8 all-time intraday high of $221.68. My annual value level is $150.83.

SPDR S&P 500 ETF Trust (SPY)

Courtesy of MetaStock Xenith

The weekly chart for Spiders ($244.57 on Aug. 28) is negative with the ETF below its five-week modified moving average of $243.98. The 200-week simple moving average or “reversion to the mean” is $208.22. The 12x3x3 weekly slow stochastic reading is projected to decline to 57.33 this week down from 66.68 on Aug. 25.

Investment Strategies: Buy weakness to my quarterly value level of $231.82. Sell strength to my weekly, semiannual, annual and monthly risky levels of $248.16, $252.96, $253.37 and $254.76, respectively. My annual value level lags $167.75.

PowerShares QQQ Trust ETF (QQQ)

Courtesy of MetaStock Xenith

The weekly chart for QQQ’s ($142.41 on Aug. 28) will shift to negative if the closes Friday below its five-week modified moving average of $141.75. The 200-week simple moving average or “reversion to the mean” is $109.09. The 12x3x3 weekly stochastic reading is projected to slip 65.78 this week down from 68.05 on Aug. 25.

Investment Strategy: Buy weakness to my quarterly value level of $131.86. My annual pivot is $139.42. Sell strength to my weekly, semiannual and monthly risky levels of $146.53, $146.49 and $150.67, respectively.

iShares Transportation Average ETF (IYT)

Courtesy of MetaStock Xenith

The weekly chart for transports ($165.04 on Aug. 28) is negative with the ETF below its five-week modified moving average of $166.49. The 200-week simple moving average or “reversion to the mean” at $148.85 last tested during the week of July 8, 2016 when the average was $132.90. The 12x3x3 weekly slow stochastic reading is projected to decline to 31.08 this week down from 40.29 on Aug. 25.

Investment Strategy: Buy weakness to my quarterly value level of $158.89. My weekly pivot is $163, 85. Sell strength to my monthly, semiannual and annual risky levels of $170.08, $181.18 and $182.54, respectively.

iShares Russell 2000 ETF (IWM)

Courtesy of MetaStock Xenith

The weekly chart for the small caps ETF ($137.46 on Aug. 28) is negative with the ETF below its five-week modified moving average of $138.12. The 200-week simple moving average or “reversion to the mean” is $120.47, last tested during the week of July 1, 2016 when the average was $108.66. The 12x3x3 weekly slow stochastic reading is projected to decline to 35.63 this week down from 43.50 on Aug. 25.

Investment Strategy: Buy weakness to my quarterly value level of $125.32. My weekly pivot is $137.32. Sell strength to my semiannual, monthly and annual risky levels of $144.61, $144.99 and $154.33, respectively.

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