Even though the Euro declined last week, stocks remained strong and closed near their highs for the week. The first chart shows the Euro Currency Trust (FXE) peaking around 133.5 and falling below 132 last week. The decline is slow and the pattern looks like a falling flag. This pattern is potentially bullish, but currently bearish because the flag is still falling. A move above 132.5 would break flag resistance and target further strength towards resistance at 136. Even though stocks are performing well with a falling Euro, a breakout in FXE would provide more positive fodder for stocks.
There is no change on the daily chart. SPY remains overbought and in a clear uptrend. With yearend approaching and seasonal patterns largely bullish, the ETF could simply remain overbought and continue working its way higher. There are three potential support levels on the daily chart. Broken resistance from the early November high turns into the first support around 122-123. Broken resistance from the late November highs turns into the second support around 120 and the November lows mark key support around 118. As far as the daily chart is concerned, these November lows hold the key to the uptrend. A move below would forge a lower low and signal the start of a downtrend.
The 60-minute chart confirms the first support level around 122. The exact resistance breakout is just a bit higher, but SPY established support with a few bounces last week. A move below 122 would be the first sign of short-term weakness. I am also watching RSI with support in the 40-50 zone. A break below 40 would turn momentum bearish.
Key Economic Reports:
Tue - Dec 14 - 08:30 - PPI
Tue - Dec 14 - 08:30 - Retail Sales
Tue - Dec 14 - 10:00 - Business Inventories
Tue - Dec 14 - 15:15 - FOMC Rate Decision
Wed - Dec 15 - 07:00 - MBA Mortgage Applications
Wed - Dec 15 - 08:30 - CPI
Wed - Dec 15 - 08:30 - Empire Manufacturing Survey
Wed - Dec 15 - 09:15 - Industrial Production
Wed - Dec 15 - 10:30 - Crude Inventories
Thu - Dec 16 - 08:30 - Initial Claims
Thu - Dec 16 - 08:30 - Housing Starts/Permits
Thu - Dec 16 - 10:00 - Philadelphia Fed
Fri - Dec 17 - 10:00 -Leading Indicators
Charts of Interest: 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.
The 60-minute chart confirms the first support level around 122. The exact resistance breakout is just a bit higher, but SPY established support with a few bounces last week. A move below 122 would be the first sign of short-term weakness. I am also watching RSI with support in the 40-50 zone. A break below 40 would turn momentum bearish.
Key Economic Reports:
Tue - Dec 14 - 08:30 - PPI
Tue - Dec 14 - 08:30 - Retail Sales
Tue - Dec 14 - 10:00 - Business Inventories
Tue - Dec 14 - 15:15 - FOMC Rate Decision
Wed - Dec 15 - 07:00 - MBA Mortgage Applications
Wed - Dec 15 - 08:30 - CPI
Wed - Dec 15 - 08:30 - Empire Manufacturing Survey
Wed - Dec 15 - 09:15 - Industrial Production
Wed - Dec 15 - 10:30 - Crude Inventories
Thu - Dec 16 - 08:30 - Initial Claims
Thu - Dec 16 - 08:30 - Housing Starts/Permits
Thu - Dec 16 - 10:00 - Philadelphia Fed
Fri - Dec 17 - 10:00 -Leading Indicators
Charts of Interest: Tuesday and Thursday in separate post.
-----------------------------------------------------------------------------
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.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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