TurboTrading's Robert Knight writes daily commentary on market trends and stock indices. This article includes about half of the Stock Watchlist for Monday, April 12. Before each New York Stock Exchange trading day, members receive the complete Stocks to Watch list. This priceless insight is just one of the membership benefits at TurboTrading.
April 12, 2021
SPY: The SPY traded to new ATHs again on Friday. In the past year the index has nearly doubled. Yet the momentum stays strong and the trend is your friend. Since November the index has stayed at the top of the channel and it is up against it now. But two longer term channel lines cross over at around 4300. We had a 260 point move over the last 2 weeks. Yet the move has consisted mainly of the FAANG stocks and big names. There has not been a broader market participation. With earnings season upon us now, I think we will start to see the broader market catch up and, therefore, continue to drive markets higher.
NDX: The NDX, after making a reverse head and shoulders pattern on the daily, has traded up to within range of all time highs. After popping out of a coil to the upside in early April the index is up 6 of the last 7 days gaining 850 points. Momentum is strong for the index. Through 13,880 and I would look for moves to mid-channel at 14,200 and the top of the intermediate channel at 14,500.
DOW: The DOW trade to new ATH as well on Friday up 4000 points from the Jan/Feb pull back. It is breaking out through the short term channel top. 35500 is the next target. This break out move with the DOW, SPY and Trannies is another Dow Theory buy signal. Eventually, with the strength of the majors, the mid cap and small cap stocks will catch up.
DJ-Transportation: The Trannies made an all time high on Monday last week. On Thursday we had a hammer candle on the pull back (bottom pattern) and on Friday the index surged back to just short of all time highs. Transportation is a key part of the economy and it is indicating strong growth to come. Look for the index to trade to 15400 and 15800 for the next few months.
IWM: As we know, the mid cap and small cap stocks have not only lagged, but have been hammered the last few months. Many stocks were down 50-70% from their highs. The IWM could be forming a head and sholders pattern here with $206 a key level. But, we don't want to anticipate that move. It could also be forming a wedge pattern here. It needs to get through $227 and then $235 to show a change in direction. I strongly believe that the IWM will bounce off the rising channel line and continue higher to $245 and then $265. Markets are strong, earnings season is upon us and these laggards will catch up.
FAS: As we predicted, the financial sector caught up with the rest of the market and now at the 52 week high. It is in a strong rising channel. This sector will be one of the leaders going forward from here. Through $100 look for $110 and $120.
LABU: After our bearish call on LABU last week, the ETF dropped over 16%. It remains in a strong down trending channel and looks to be the start of the 5th wave down of a 5 wave pattern. It could truncate if it holds support at $65. But a break below that level and the bottom of the channel is around $45. It needs to get through $80 to show a change in direction. For now, we continue to avoid the sector.
SMH: The SMH chart looks very similar to the NDX. It made a V bottom right hand extension pattern. Now it is breaking out of the flag and traded up close to the ATH. Watch for continuation over $260 as I think this will be one of the leading sectors over the next 2 years. Targets are $280 and $300.
GUSH: Even though oil remains strong ($60/bbl) the GUSH has made head and shoulders pattern. It is breaking down through the neck line and through the rising channel line. Key support around $58. For now we are staying away from the sector. But with the transportation sector so strong, I think it will continue to move higher. Just not yet.
NUGT: Large engulfing bullish bar on Friday with the NUGT. But it remains in a strong declining channel. It is right at the top of the channel and key lateral resistance. If the NUGT can break out through $64/$65 it could signal a change in direction for gold stocks and we would look to start putting swings on for this sector as many of them are trading at the lows. Don't anticipate. Wait for the signal of a change in direction.
Technical Indicators: The technical indicators remain very neutral. 55% of stocks are trading above their 40 day moving averages and the McClellan Oscillator is 37. As we know, and the indicators confirming, we do not have broad participation in this market. It is the market "Generals" that are leading the way. That point is highlighted by VIX continuing to drift lower at 16.7. This is a bullish reading for markets. But with the market neither overbought nor oversold, we have a lot of internal energy to continue to drive the indices higher as the mid cap and small cap stocks start to catch up. Look for markets to continue to trade to new ATHs.
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