Moves That Matter on the Charts

The Dow Jones Industrial Average broke through resistance last Friday leading the indexes to the upside. Tuesday the S&P 500 index and the NASDAQ both made key moves to the top end of resistance currently. A solid follow through today on the upside would be positive for the broad markets and the current run off the November 15th low. The most interesting part of the current bounce is the lack of attention paid to the overall pullback/correction that preceded the move. The NASDAQ fell more than 350 points from the high of 3182 on the close in September. The significance of the move lower was lost in the worry about the election and the pending fiscal cliff issues. Thus, the current rally off the recent lows is much the same… lost in the political bantering in Washington DC.

Let’s look at the moves of note from Tuesday:

DIA, SPDR Dow Jones Industrial Average ETF confirmed the move above the $131 mark broken on Friday. The $133 resistance is next and equates to 13,300 on the index. The large cap index has been the leaderĀ amongĀ the three major indexes on the move the first to to clear resistance. The short term outlook is for a move back to the previous high near $136. 3M, Alcoa, Cisco, Travelers and others have led the charge in the last week to push through resistance. Scanning the thirty stocks is a worthwhile endeavor to find the leaders.

SOXX, iShares Semiconductor ETF pushed through the $51.50 level on Monday and then accelerated higher on Tuesday. The gain pushes the index through the potential resistance at $52 and to the 200 day moving average. This is the sector that lead the downside in the NASDAQ broad market index. The move off the recent lows has been solid with leadership coming from the telecom and tablet space. Rambus and Intersil led the index higher as both stocks gained more than 8% on the Tuesday. There is plenty of upside left in the sector if the data can support them move going forward.

XLI, SPDR Industrial ETF broke through the top end of the trading range that has been in place since September. As the Dow Jones Industrial index showed above the sector is a leader for the broad market despite the small allocation or weighting to the overall market. Ā The Airline stocks were the leaders on Monday with the Delta/Virgin Atlantic merger. Construction and Transportation stocks are adding to the upside strength. Scanning the 45 stocks that make up the ETF offers some interesting looks at nice moves off the recent lows and through resistance.

XLV, SPDR Healthcare ETF broke above the $40.50 resistance and back towards the previous high at $41.25. The obvious question on this move is how much upside is left in the broad sector? Based on the numbers enough to keep our interest, but based on the technical data… not much. The chart would have to take out the $41.25 on positive momentum for the sector to warrant playing. The sub-sectors are adding to the upside pressure as the medical devices, pharmaceuticals, biotech and the providers are all contributing to the short term run for the sector. Could be time to dig into the sector and find the stocks leading the way higher.

XLF, SPDR Financials ETF made a move through the $16 resistance and stalled. Despite the broad market move higher on Tuesday the sector couldn’t find the upside. The move through the $15.85 level was a positive and the upside is definitely in play. The banks continue to drag along with the regional banks and insurance. We need some leadership from the large banks, but that is not coming anytime soon based on the current data. Look for a break through despite the rumors and the disappointment from investors. The trueĀ CinderellaĀ of the sector is the insurance stocks bouncing back from the Sandy disaster. Financials are the one sector to dig in and find the leaders to own.

The key on the upside remains momentum. Without the push higher and volume to support the move, it will only be temporary. Today matters on the follow through to the upside moves across the broad indexes. The conclusion of the FOMC meeting could provide the spark or catalyst if the Fed attaches QE4 and starts buying Treasury bonds as well as mortgage backed securities. Watch the report as it could hold the key for the day relative to direction. Patience wins the race and there is still plenty of room on the upside, but it comes with risk. One day at time remains the motto.