The Euro broke resistance as long-term rates fell back to support. The first chart shows the Euro Currency Trust (FXE) breaking above range resistance and moving above the triangle trendline. This bullish development for the Euro is a positive for stocks. Range support around 138-138.2 is now the first level to watch for yet another short-term reversal. The Euro advance from last week's low coincides with a fall long-term rates. The second chart shows the 10-year Treasury Yield ($TNX) declining back to broken resistance, which now turns into support. $TNX established short-term resistance with Monday's high. A break above this level would resume the uptrend in rates and this in turn could weigh on the Euro. A breakout in rates and downturn in the Euro would be negative for stocks. It has yet to happen, but this is something to watch as we head into today's Fed statement, tomorrow's European Central Bank (ECB) policy statement and Friday's employment report.
There is still no change on the daily chart. Even though the advance has grown laborious, SPY remains in an uptrend. The surge above 114 on September 20th marked the easy part of the advance. Since this surge, SPY has worked its way higher within a rising price channel. Many indecisive candlesticks formed, but the uptrend was never reversed with a downside move. A break below channel support at 117 would argue for a pullback towards broken resistance around 112. CCI remains in its bull zone and has yet to break 50 to signal weakness in momentum.
There is not much change on the 60-minute chart. With Tuesday's gap and surge above 119, SPY is challenging resistance yet again. Even after a failed gap and sharp pullback on Monday, support held around 118 and the ETF quickly surged back to resistance. There is a lot of support around 118 and I am raising key short-term support to 117.70. A break below this level, combined with an RSI break below 40, would reverse the short-term uptrend.
Key Economic Reports:
Wed - Nov 03 - 07:00 - MBA Mortgage Applications
Wed - Nov 03 - 10:00 - ISM Services
Wed - Nov 03 - 10:00 - Factory Orders
Wed - Nov 03 - 10:30 - Crude Inventories
Wed - Nov 03 - 14:00 - Auto-Truck Sales
Wed - Nov 03 - 14:15 - FOMC Rate Decision
Thu - Nov 04 - 08:30 - Initial Claims
Thu - Nov 04 - 08:30 – Bank of England Policy Statement
Thu - Nov 04 - 08:45 – European Central Bank Policy Statement
Fri - Nov 05 - 08:30 - Employment Report
Fri - Nov 05 - 10:00 - Pending Home Sales
Charts: Tuesday and Thursday in separate post.
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This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
