Once Largest ETF in the World Drops Out of Top 10

At one point in history, the SPDR Gold Shares (NYSEArca: GLD) was the world’s largest ETF.

Courtesy of a massive gold bull market and the accompanying hysteria, GLD’s assets mushroomed to $77.5 billion. That was in August 2011.

Back than, the S&P 500 traded around 1,100. Gold traded near 1,900. How the roles have reversed (Gold at 1,100, S&P at 2,050).

The SPDR S&P 500 ETF (NYSEArca: SPY) is now $205 billion strong, while GLD amounts to ‘only’ $27 billion, the 12th largest ETF in the world.

This data may be of some use to contrarians on gold bugs.

In fact, back in December 2013 I used official data from iShares and State Street on the SPDR Gold Shares, iShares Gold Trust (NYSEArca: IAU) and iShares Silver Trust (NYSEArca: SLV) for very insightful sentiment analysis.

The data (tons of gold/silver held, and trading volume) helped me come to the conclusion that gold and silver were still miles away from a major low (view original  SLV analysis or GLD analysis).

Unfortunately iShares does not offer that data anymore (I send an e-mail every month to bug them, but it hasn’t helped).

Other sentiment data and technical analysis triggered a buy signal (sent to subscribers of the Profit Radar Report) for gold in November 2014 at 1,140 (111 for GLD).

We’ve been holding on ever since, but gold needs to surpass strong overhead resistance to give the preferred bullish scenario some teeth.

The fact that GLD has fallen out of favor with investors is a check mark on the bullish side of the ledger.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Simon Says: This May Be The Only Bearish Looking Broad Market Index Chart

Aside from the autumn colors, everything is green on Wall Street. Stocks are up almost everywhere you look. There is only one broad market index that could reasonably be interpreted as being bearish.

The Dow Jones, S&P 500 and Nasdaq are at new (all-time) highs, and it takes a permabear or nit-picky glass half empty kind of a person to find anything alarming in those charts.

Perhaps the most bearish looking chart is that of the NYSE Composite Index (NYA). The NYA measures the performance of all common stocks listed on the New York Stock Exchange (NYSE). There are currently 1867. The iShares NYC Composite ETF (NYSEArca: NYC) replicates the performance of the NYA.

Unlike the Dow Jones and S&P 500, the NYA also includes small cap stocks, which explains why the NYA is lagging.

In fact, the NYA chart gives hope to all those who missed the latest rally. Why?

The NYA is bumping up against a serious resistance cluster made up of:

  1. 78.6% Fibonacci resistance
  2. Trend line resistance
  3. Prior support shelf

In addition, (bearish) Elliott Wave aficionados may be quick to point out that the NYA’s decline from the September high to the October low could be counted as five waves.  Such a 5-wave move would suggest at least one more leg lower.

Complex Analysis Made Easy – Sign Up for the FREE iSPYETF E-Newsletter

The overall strength of the “October blast” rally suggests that NYA will eventually surpass this resistance cluster. But if NYA is going to pull back and fill some of the open chart gaps, right about now (or at 10,850 – 10,900) seems like an appropriate time to do so.

The Dow Jones is also about to run into the same resistance level that caused the September correction.

Solid resistance levels, like the ones shown above, increase the risk of a pullback, but obviously don’t guarantee said pullback. Higher targets are unlocked if the NYA and Dow Jones sustain trade above resistance.

A detailed forecast for the remainder of the year – based on an analysis of seasonality, sentiment, technical indicators and historical patterns – is available in the November 2 Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Simon Says: Here is Big Support for Small Cap Stocks

Some say if it’s too obvious, it’s obviously wrong, but when it comes to the Russell 2000 you may ask: How could you have missed this? The media proclaimed the Russell 2000 in a ‘correction’ just before it bounced from key support (three times).

Sometimes the financial media sacrifices accuracy (or neutrality) to deliver the WOW effect.

That’s why we read headlines like this:

“Scary October Start for Stocks; Russell in Correction.”

Perhaps this particular WOW-focused media outlet felt it was close enough to Halloween to paint a 1.32% S&P 500 and 1.54% Russell 2000 drop as ‘scary.’

A correction is often (arbitrarily) defined as a 10% decline. From March to May and once again from July to September, the Russell 2000 lost 10%. A correction? Maybe.

The chart below shows why labeling anything Russell related as ‘scary’ or ‘correction’ was premature.

Every pullback, or ‘correction’ since November 2013 ended at support at 1,080.

I picked on this fear-mongering headline in the October 1 Profit Radar Report and commented that:

“The Russell remains above support around 1,080. I suppose that even novices are able to spot this support level by now, so it probably doesn’t mean as much as it did in February and May. Nevertheless, the odds for some sort of bounce from here are above average.”

Well, I was kind of wrong. 1,080 meant just as much last week as it did the prior three times it was touched.

At some point this support will become too obvious for its own (or investors) good, but one thing is for certain:

Correction or not, bears cannot make any real progress unless the Russell 2000 breaks below 1,080.

The corresponding support level for the iShares Russell 2000 ETF (NYSEArca: IWM) is 107.

Will the Russell 2000 break below 1,080 in October? Sunday’s special Profit Radar Report includes detailed analysis on what new lows would mean for the stock market and whether the market is carving out a major top.

The conclusion is not ‘scary’, but probably surprising for most people.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Emerging Markets ETFs Are Trying to ‘Emerge’ Above Key Resistance

Emerging markets ETFs have been in a sideways trading zone for well over two years. Now, the two most popular emerging markets ETFs are at the cusp of breaking above multi-year double resistance levels.

The iShares MSCI Emerging Markets ETF (NYSEArca: EEM) has been spinning its wheels, trying to rally above serious long-term resistance.

The weekly EEM bars have been rebuffed by the red trend line (dating back to the emerging markets hey days in 2007) and the horizontal red zone (around 45.25) no fewer than seven times.

The technical picture for the Vanguard Emerging Markets ETF (NYSEArca: VWO) looks slightly different.

VWO already surpassed its ascending red trend line, but is still being held back by the red resistance zone around 45.50.

I’m not smart enough to compose a high probability directional forecast at this point, but the charts say that EEM and VWO’s reaction to their resistance zones will likely set the stage for the next (sizeable?) move.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Quirky but Accurate Indicator: Housing Sector Troubles Likely to Continue

Sometimes the oddest correlations make the best forward-looking indicators. This is certainly the case with lumber and the housing market. Here’s what this odd but accurate indicator ‘sees’ ahead for U.S. real estate.

Several times in the past we’ve looked at the correlation between lumber and housing – related ETF: iShares US Real Estate ETF (NYSEArca: IYR).

It’s an off the wall kind of an indicator, but it’s proven more accurate than any other housing indicator.

To get the correlation right, we need to set lumber futures forward by about 14 months.

The chart below does just that, as it plots lumber against the PHLX Housing Sector Index.

Lumber 514

As the gray oval on the right shows, lumber saw a big pop and drop in 2012/2013.

The two gray ovals to the left illustrate that the magnitude of such sizeable pops and drops tends to appear muted in the housing sector, nevertheless it suggested an eventual slowing of the housing market.

Lumber is currently at an interesting juncture, as lumber prices were unable to break above resistance and just fell to test support.

As of right now, lumber suggests that the housing market is not ‘out of the woods’. The housing blues may start all over if support for lumber fails.

This would not only affect multi-billion dollar ETFs like the Vanguard REIT ETF (NYSEArca: VNQ), or SPDR Dow Jones REIT ETF (NYSEArca: RWR), but also millions of Americans.

A proprietary analysis of supply and demand for the SDPR S&P Homebuilders ETF (NYSEArca: XHB) also shows that demand for homebuilding stocks is deteriorating.

 

How Bad is Small Cap Underperformance for the Broad Stock Market?

The small cap sector has lost as much as 10% while the Dow Jones and S&P 500 are still within 1% of their all-time high. This chart illustrates the discrepancy better than any other. How bad is this for the broad stock market?

Small cap stocks have been taking it on the chin. The Russell 2000 lost as much as 9.85%. How bad is small caps’ performance relative to large caps?

Bad! Here’s a look at the small cap:large cap ratio (published in yesterday’s Profit Radar Report). The chart below shows the ratio between the iShares Russell 2000 ETF (NYSEArca: IWM) and the iShares Russell 1000 ETF (NYSEArca: IWB).

Small caps erased an 11-month performance edge in less than 6 weeks. The last time the IWM:IWB dropped as far was from July – October 2011.

The second chart plots the S&P 500 (SNP: ^GSPC) against the IWM:IWB ratio. The July – October 2011 small cap underperformance (big IWM:IWB drop) was a coordinated decline that saw large and small caps decline at the same time.

Small caps just fell much harder than the S&P 500.

This time is different. Small caps are down significantly while large caps (S&P 500 and Dow Jones) remain within 1.5% of their all-time highs.

At the same time, the Russell 2000 closed below the 200-day SMA for the first time since November 21, 2012.

However, this may be more of a bear trap than a sell signal. There is a must hold support area that’s more important (because not as obvious) and less prone to false signals than the 200-day SMA.

Must hold support is outlined in yesterday’s Profit Radar Report.

Personally, I feel that there’s been too much bearish media coverage for stocks to enter an immediate, prolonged correction (must hold support will tell me when I’m wrong), so I’m also looking at key resistance. The kind of resistance that should U-turn a bounce.

Must hold support is discussed in yesterday’s Profit Radar Report. Key resistance is revealed here:

The Secret Dow Jones Barrier Every Investor Should Know

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Corporate Bonds Inching Towards Bull Trap Territory

2014 has been the year of bull traps, here’s another trap under construction: Corporate bonds, represented by the iShares iBOXX $ Investment Grade Corporate Bond ETF, paint a fairly clear technical picture.

The iShares iBOXX $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) is at or near an interesting inflection point.

LQD has been climbing higher in a rising wedge formation. Although there is no specific price barrier, a rising wedge typifies a scenario where buying pressure progressively weakens.

Here is where things get interesting: The wedge pattern often culminates with a throw-over top. Such a throw-over top would align well with resistance (more below).

A throw-over top is a brief spike above the upper (red) resistance line. This bull trap is designed to get investors to buy into the market just before it’s getting ready to sell off (a common down side target is the beginning of the wedge).

Here is how the wedge pattern could play out for the iShares Corporate Bond ETF (LQD):

Wedge resistance is currently at 118.30. Fibonacci resistance (61.8% from the October 2012 high) is at 118.44. The February and March 2013 lows are around 118.70. This forms a resistance cluster at 118.30 – 118.70.

If LQD adheres to the guidelines of a rising wedge pattern, a brief spike into the 118.30 – 118.70 resistance cluster could be followed by a decline back to 113. Sustained trade above the upper wedge line would warn that the pattern is a no go.

The charts for other bond ETFs like the iShares Core Total U.S. Bond ETF (NYSEArca: AGG) look similar.

If you are like me, you wonder how corporate bonds affect the S&P 500 (SNP: ^GSPC).

Here’s a detailed look at how corporate bonds affect the S&P 500 in general and what a corporate bond fund break down would mean the for the S&P 500 right now.

Could a Bearish Corporate Bond Pattern Sink the S&P 500

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.