by Jim Stanton, Technical & Quantitative Analyst, Smart Profits Report
In my last “Sector Watch” column on April 27, I posted a spread chart of the daily Nasdaq 100 and S&P 500 chart (this is the Nasdaq 100 minus the S&P 500).
At the time, the chart was approaching its 62% Fibonacci retracement level from the August 2008 highs to the November lows and I issued some resistance targets on indexes that hadn’t reached their minimum upside targets.
Last week, all those minimum targets were reached, in addition to the resistance levels on the PowerShares QQQ Trust (Nasdaq: QQQQ), the ETF that tracks the performance of the Nasdaq 100 (Nasdaq: ^NDX). The Nasdaq 100/S&P 500 spread chart also reached the 62% retracement area.
Here’s what this means…
The Selloff Trigger: 1,377 Points On The Nasdaq 100
The fact that the above scenarios fell into place actually increases the chances of a market correction in the near future.
Having reached the 62% retracement level, the spread chart broke down a bit and closed out the week below its short-term uptrend line. The low on the Nasdaq 100 last Thursday was 1,377.67 and price acceptance below that area should lead to further selling.
Now for this week’s selected sector…
Commodities On The Move
As my colleague and commodities expert Lee Lowell has mentioned here, several top commodities are on the move, having fed off the March lows for the stock indexes.
Sugar, coffee, and cocoa have all darted higher. And following a 70% drop from high to low (which was actually 15% worse than the stock indexes), crude oil has also rallied around $20 higher over the past couple of months. The Energy Select Sector SPDR (NYSE: XLE), which represents oil and oil service companies is trading at a four-month high.
Part of this commodities resurgence is because of optimism that the worst of the U.S. recession is over, plus stronger demand from China and a weakening U.S. dollar. So let’s take a look at one of the most interesting-looking commodities as we head into summer…
Sector Spotlight: Natural Gas
Want to find a worse performer than crude oil?
Check out the natural gas market. This is a very volatile area, with futures having twice fallen by 70% or more over the past four years.
