Market Review (with revision for Top 5 ETFs)
Overall the stock market advance has stalled in the past two weeks, after rising the week ending September 20 and falling this past week. The NASDAQ Composite continued to advance the last two consecutive weeks while the other two averages have had a reversal to the downside (key in the $SPX and $INDU symbols in the $COMPX chart). The DJIA made an all-time high above 15,700 on September 18 (Fed announcement day), but has given back 442 points since then and also crossed below its 50-dma. The S&P 500 also hit an all-time high of 1730 that day, but closed this week at 1691.75, below the critical 1700 level. You will note on those two charts that the MACD has crossed to the downside as of the Friday close. On the other hand the NASDAQ Composite is holding its MACD positive crossover, but barely. Moreover, this index appears to be consolidating just below the 3800 level (see first chart).
The number of 52-week NYSE highs fell to 294 from the prior week’s 515, not a positive sign. Even though the market made new highs the week ending September 20, the number of new highs was 515 which was below that of 586 on July 19, another negative divergence.
The NASDAQ continues to show the best performance for 2013. This past week the NASDAQ Composite was the only winner gaining 0.18%, followed by the S&P 500 losing 1.06%, and lastly the DJIA losing 1.25%. So far year-to-date, the BDH ETF performance has been 10.13%, according to dark-liquidity.com. This compares with the NASDAQ Composite’s 25.24% performance, S&P 500 performance of 18.62%, and the DJIA performance of 16.44%.
Bond ETF prices have bounced back nicely from the early September lows, but are still down significantly from the May highs (type in TLT, BOND or JNK in first chart to see the uptrend).
Indicator Review – No Changes This Week
Indicator #2 NASDAQ Composite Index and 100-dma. This indicator remains on its January 3 BUY signal with the index price well above its 100-dma. (Refer to first chart).
Indicator #5 NASDAQ Composite with MACD. This indicator had a discernible positive MACD crossover on Monday September 9, thus triggering a BUY signal (refer to first chart). Currently, a crossover to the downside is very close to happening. So be on the lookout for it this coming week if the index declines in price.
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest September 25th bullish percentage reading of 36.1% was significantly lower than the September 18th bullish percentage reading of 45.1%. Investors now are much less bullish than the prior week looking out six months. This indicator remains on its April 18th BUY
Indicator #8 NASI Summation Index and MACD. The indicator issued a BUYsignal as of September 10th as both the Index and the MACD had positive crossovers. (Refer to second chart). Currently the index may be turning downward as indicated by the last day’s entry in red.
Dashboard Remains on Maximum “4” BUY Signal
The latest Dashboard data is presented in the link below:
Dark Liquidity BDH Performance Statistics
www.dark-liquidity.com/BDHV2new.php independently tracks the BDH performance. The Dashboard ETF portfolio year-to-date is up 11.17% which has improved substantially from prior weeks, but is still below that of the three major indexes which have advanced smartly for the year. Note that XLV has to be removed as it dropped below the 10th ranking on etfscreen.com, and replaced with XLY. See my note below for a further explanation
Top 5 ETFs – 100% Invested
The Top 5 ETFs were bought on the open on September 10th as mentioned in the September 9th blog posting. Currently, all except IBB are on a “pass” rating. On September 26, 2013 XLV declined below rank 10 and was sold at $50.42 the opening price on September 27. XLY replaced it with a purchase at the open on September 27 at $60.64. Performance details are provided in the following link:
Since their purchase, the Top 5 ETFs have gained 1.70% versus a gain of 1.28% for the averages.
Note that on the etfscreen.com/buydonthold Decision page that now only 18 out of 42 ETFs have a “pass” rating down from 27 the week ending September 13th. With the market’s weakening, the number of ETFs showing “pass” ratings has begun to decline again.
Conclusion – Market Stalling Out or Consolidating
The stock market is having trouble making progress as both the DJIA and S&P 500 are in short-term downtrends while the NASDAQ Composite continues to move higher. Indicator #5 is close to a SELL signal and Indicator #8 could follow if the NASDAQ prices decline this week.
Be careful and make sure you have your stop LIMIT orders in place to protect your profits. News out of the Washington, DC regarding the budget and debt ceiling will likely result in higher than normal volatility this week.