Negative Divergences Spread Among The Five ETFs Representing The Five Major Equity Averages

Richard Suttmeier

The five major U.S. equity averages can be traded using five markets ETFs. The Dow Jones Industrial Average is represented by Diamonds. The S&P 500 is represented by Spiders. The Nasdaq 100 is represented by the QQQ’s. Transports is represented by iShares IYT. The Russell 2000 is represented iShares IWM.

SPDR Dow Jones Industrial Average ETF (DIA)

Courtesy of MetaStock Xenith

The weekly chart for Diamonds ($218.52 on Aug. 11) is positive but overbought with the ETF above its five-week modified moving average of $216.92 and above its 200-week simple moving average or “reversion to the mean” at $179.20, last tested during the week of Feb. 12, 2016 when the average was $157.98. The 12x3x3 weekly slow stochastic reading remains well above the overbought threshold of 80.00 at 92.52.

Investment Strategy: Buy weakness to my semiannual and quarterly value levels of $214.93 and $203.15, respectively. My annual pivot of $220.14 remains a magnet. This week’s pivot is $219.51. Sell strength to my monthly risky of $226.26. My annual value level is $150.83.

SPDR S&P 500 ETF Trust (SPY)

Courtesy of MetaStock Xenith

The weekly chart for Spiders ($244.12 on Aug. 11) is neutral with the ETF just below its five-week modified moving average of $244.72. The 200-week simple moving average or “reversion to the mean” is $207.56. The 12x3x3 weekly slow stochastic reading remains above the overbought threshold of 80.00 at 86.59.

Investment Strategies: Buy weakness to my quarterly value level of $231.82. Sell strength to my weekly, semiannual, annual and monthly risky levels of $246.70, $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 ($142.10 on Aug. 11) is neutral with the ETF above its five-week modified moving average of $141.55. The 200-week simple moving average or “reversion to the mean” is $108.19. The 12x3x3 weekly stochastic reading slipped to 76.94 last week down from 79.02 on Aug. 4.

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 $246.70, $146.49 and $150.67, respectively.

iShares Transportation Average ETF (IYT)

Courtesy of MetaStock Xenith

The weekly chart for transports ($165.40 on Aug. 11) is negative with the ETF below its five-week modified moving average of $168.40. The 200-week simple moving average or “reversion to the mean” at $148.20 last tested during the week of July 8, 2016 when the average was $132.90. The 12x3x3 weekly slow stochastic reading declined to 63.95 last week down from 74.30 on Aug. 4

Investment Strategy: Buy weakness to my quarterly value level of $158.89. 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 ($136.47 on Aug. 11) is negative with the ETF below its five-week modified moving average of $139.41. The 200-week simple moving average or “reversion to the mean” is $120.21, last tested during the week of July 1, 2016 when the average was $108.66. The 12x3x3 weekly slow stochastic reading declined to 69.90 last week down from 78.87 on Aug. 4.

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

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