PowerShares QQQ Continues to Set New High, as Transports Slip from the Fast Lane

Richard1944

The bulls remain in control of the U.S. stock market, but away from the momentum of tech stocks, transports and small caps are beginning to show characteristics that typically occur when a technical correction looms. Let’s preview!
The SPDR Dow Jones Industrial Average ETF (DIA), known as Diamonds, has a positive weekly chart but lags its March 1 all-time intraday high of $211,59.
The SPDRS&P 500 ETF Trust (SPY), known as Spiders, has a positive weekly chart but lags its March 1 all-time intraday high of $240.32.
The PowerShares QQQ Trust ETF (QQQ), known as QQQ’s, has a positive but overbought weekly chart and set its latest all-time intraday high of $138.63 on Friday, May 12.
The iShares Transportation Average ETF (IYT), known as transports, has a neutral weekly chart and lags its March 1 al-time intraday high of $173.88.
The iShares Russell 2000 ETF (IWM), known as small caps, has a positive weekly chart, but a small decline this week will result in a technical downgrade. Small caps lag its all-time intraday high $141.81, set on April 26.
New highs obviously remain feasible for Diamonds, Spiders and QQQ’s, but the upside to risky levels should be limited to about 5%.
When looking the weekly charts below, keep an eye on the 200-week simple moving averages shown in green, as investors should consider this level as the "reversion to the mean". The "reversion to the mean" is an investment theory that the price of an index, stock or ETF, will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A ticker trading above its “reversion to the mean” will eventually decline back to it on weakness. Similarly, a ticker trading below its “reversion to the mean” will eventually rebound to it on strength.

The PowerShares QQQ remain the leader so far in 2017 with a gain of 17% year to date. This ETF is in bull market territory 21.6% above its Nov. 14 post-election low of $114.03. The laggard is transportation down 0.3% year to date. This ETF is 6.7% below its post-election high of $173.88 set on March 1.
SPDR Dow Jones Industrial Average ETF (DIA)


Courtesy of MetaStock Xenith
The Dow Jones Industrial Average INDU (20,896.61 on May 12) set its all-time intraday high of 21,169.11 on March 1. My weekly and quarterly value levels are 20,565 and 19,189, respectively, with my semiannual pivot at 20,893, which proved to be a magnet last week. My annual value level is 15,111. Sell strength to my monthly, annual and semiannual risky levels of 21,279, 22,042 and 22,148, respectively.
The weekly chart for Diamonds (DIA) ($209.01 on May 12) is positive with the ETF above its key weekly moving average of $207.31. The 200-week simple moving average is the “reversion to the mean” at $174.84. Weekly momentum ended last week rising to 69.05 up from 66.20 on May 5. Buy weakness to my weekly and quarterly value levels of $205.58 and $191.55, respectively. My semiannual pivot of $208.59 proved to be a magnet last week. Sell strength to my monthly, annual and semiannual risky levels of $212.44, $220.14 and $221.34, respectively. My annual value level is $150.83.
SPDR S&P 500 ETF Trust (SPY)


Courtesy of MetaStock Xenith
The S&P 500 ^GSPC (2,390.90 on May 12) set its all-time intraday high of 2,403.87 on May 9. My weekly and quarterly value levels are 2,356.2 and 2,225.5, respectively, with a monthly pivot of 2,385.9, which proved to be a magnet last week. My annual value level lags at 1,676.1. Sell strength to my semiannual risky level of 2,492.4. My annual and semiannual risky levels are 2,537.9 and 2,608.9, respectively.
The weekly chart for Spiders (SPY) ($238.98 on May 12) is positive with the ETF above its key weekly moving average of $236.51. The 200-week simple moving average is the “reversion to the mean” at $202.30. Weekly momentum rose to 75.09 last week up from 69.50 on May 5. Buy weakness to my weekly and quarterly value levels of $235.78 and $221.96, respectively. I show a monthly pivot of $237.89, which has been a magnet so far in May. Note that when the S&P 500 set its new high on May 9, Spiders stayed shy of its March 1 high of $240.32. Sell strength to my semiannual risky level of $248.68. My annual value level is $167.75 with annual and semiannual risky levels of $253.37 and $260.40, respectively.
PowerShares QQQ Trust ETF (QQQ)


Courtesy of MetaStock Xenith
The Nasdaq Composite NDAQ (6,121.23 on May 12) set its all-time intraday high of 6,133.00 on May 9. My weekly and quarterly value levels are 6,038 and 5,512, respectively, with semiannual and monthly pivots of 5,946 and 6,045, respectively. The Nasdaq has been above these potential magnets so far in May. My annual value level is 4,331 with annual and semiannual risky levels at 6,253 and 6,387, respectively.
The weekly chart for the Nasdaq 100 ETF (QQQ) ($138.60 on May 12) remains positive but overbought with the ETF above its key weekly moving average of $134.02, and set its all-time intraday high of $136.63 on May 12. The 200-week simple moving average is the “reversion to the mean” at $104.02. Weekly momentum ended last week at 93.04 up from 90.14 on May 5, moving further above the overbought threshold of 80.00. Buy weakness to my weekly, monthly, semiannual and quarterly value levels of $136.90, $134.81, $128.39 and $125.37, respectively. Sell strength to my semiannual and annual risky levels of $139.27 and $139.42, respectively. The upside potential to $139.42 is not worth the risk of new money. My annual value level lags at $98.20.
iShares Transportation Average ETF (IYT)


Courtesy of MetaStock Xenith
Dow Transports (9,001.14 on May 12) set its all-time intraday high of 9,639.33 on March 1. My annual and quarterly value levels are 7,910 and 7,741, respectively. My weekly pivot is 8,954. Sell strength to monthly and semiannual risky levels of 9,918 and 9,980, respectively. Annual and semiannual risky levels are 10,167 and 10,713, respectively.
The weekly chart for the Transports ETF (IYT) ($162.30 on May 12) has been downgraded to neutral with the ETF below its key weekly moving average of $164.01. The 200-week simple moving average is the “reversion to the mean” at $144.86. Weekly momentum reading ended last week rising to 35.23 up from 34.53 on May 5. Buy weakness to my weekly and quarterly value levels at $159.67 and $139.43, respectively. Sell strength to monthly, annual and semiannual risky levels of $178.77, $182.54, $192.85, respectively.
iShares Russell 2000 ETF (IWM)


Courtesy of MetaStock Xenith
The Russell 2000 (1,382.76 on May 12) set its all-time intraday high of 1,425.70 on April 26. My weekly, quarterly and annual value levels are 1,362.51, 1,222.14 and 1,091.77, respectively. Sell strength to my monthly and semiannual risky levels of 1,439.60 and 1,487.52, respectively. Annual and semiannual risky levels are 1,548.95 and 1,549.50, respectively.
The weekly chart for the small caps ETF (IWM) ($137.51 on May 12) is positive with the ETF just above its key weekly moving average of $137.28, so just a modest decline this week will result in a technical downgrade. The 200-week simple moving average is the “reversion to the mean” at $117.76. Weekly momentum rose to 56.24 this week up from 51.86 on May 5. Buy weakness to my quarterly value level at $121.48. This week’s pivot is $138.24. Sell strength to monthly, semiannual and annual risky levels of $142.96, $154.12 and $154.33, respectively.

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