ETF Reflections: U.S. Stocks Worth A Look
Tim Knight | Aug 22, 2021 12:37AM ET
Preface to all ETF Posts: I composed this on Thursday afternoon, so the charts will be up-to-date as of then. I wanted to make some general comments about specific ETF groupings, principally to give me a little time to not have to worry about creating new content for you good people in the near-term.
I’m not sure if you’ve heard, but I’m a stocks bear. I’d like to share a few major equity ETFs with that in mind.
The most important one, to me, is the small caps symbol—iShares Russell 2000 ETF (NYSE:IWM)—which has been landlocked in a range for the entirety of 2021. It has made five serious attempts to break support, and this most recent one is particularly exciting, because it also happens to be near a very long-term supporting trendline (the red one). Break 206.52, and it’s bombs away.
I’m less excited by the NASDAQ Invesco QQQ Trust (NASDAQ:QQQ), not because it isn’t insanely overvalued, but because the topping pattern is a wee little thing compared to the glory of the IWM. It completed its small topping pattern on Thursday, but closed above support. Tech’s infatuation with higher interest rates is a headwind.
The oldest and biggest fund of them all, the SPDR® S&P 500 (NYSE:SPY), has been in an ascending channel since April. On Thursday, it pretty much opened at the low and fought back all day long. Suits me! The longer they prop this dreck up, the greater the fall. That supporting trendline (the lower of the parallels) is key, medium-term.
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Not surprisingly, the triple-bullish-on-small-caps fund Direxion Daily Small Cap Bull 3X Shares (NYSE:TNA) looks very much like IWM. I’m fascinated, because in spite of its highly leveraged nature, it has not taken on the warped and distorted appearance you might expect. Instead, it is a handsome topping pattern in its own right.
For those who want to be short a specific sector, you could do worse than the biotechs via SPDR® S&P Biotech ETF (NYSE:XBI), which is nearing its own breakdown.
Lastly is SPDR® S&P Retail ETF (NYSE:XRT), which has been resolute in defying a breakdown. As the stimmy checks and unemployment dry up, however, I strongly suspect the glut of stuff that people have bought, which they don’t need, with all their earlier free money, will cease too.
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