Eaton (ETN) has been outperforming the S&P 500 but it has recently started to lose some of its vigor and we are starting to see some weakness in our favorite indicators. None of this implies a major top pattern but it does suggest we should be on alert for a soft patch or a correction.
In this daily chart, above, we can see that holders of ETN from the January low have done nicely, besting the single-digit gains of the S&P 500. Since the highs of August, ETN has pulled back while the S&P 500 has been relatively steady. Prices are below the declining 50-day simple moving average line but still above the rising 200-day line. The On-Balance-Volume (OBV) line has been flat for two to three months and does not indicate aggressive buying that could take ETN still higher. The trend-following Moving Average Convergence Divergence (MACD) oscillator is in bearish territory below the zero line.
This three-year weekly chart of ETN, above, has mixed signals. Prices are above the rising 40-week moving average line and the OBV line on this timeframe shows strong accumulation since the January low. The weekly MACD oscillator sent a liquidate-longs sell signal in early September. While the $62-$58 area should act as support, ETN may push down in this area precipitated by a weak close below $62, should it happen.