As we head into the thick of earnings season next week, I thought I’d share a few thoughts on some critically important exchange-traded funds.
We begin with the DIA “diamonds”, the Dow 30 fund, which has a triple-top (see horizontal) and got smacked hard on Friday, thanks largely to Boeing.
The small caps, unlike the Dow, aren’t anywhere near their own lifetime high. Instead, we’ve spent the entirety of 2019 grinding up and down in a sine wave. I consider the horizontal I’ve drawn below to be resistance of medium-strength importance.
In a very similar fashion, the Transports (the Dow 20) fund, IYT, is approaching a level of somewhat important resistance, which is the price gap where that horizontal line is anchored.
The NASDAQ is going to be heavily influenced by some monster earnings report over the next two weeks. As with the DIA, it has had three distinct instances of approaching lifetime highs. At the moment, it is precariously perched on the trendline going all the way back to the March 2009 low.
One constant ally on the NASDAQ which is starting to look a little shaky is the semiconductor fund, symbol SMH. It had a clean breakout on Tuesday, but that fizzled the reset of the week, closing at the week’s low.
So, overall, equities are poised for new highs but look quite vulnerable. One key deciding factor, I believe, is going to be the chart below – – the TLT (bonds). If the selling in bonds has abated, and these can start to gather strength again, it’ll drain the air right out of equity’s tires.