Stocks extended their gains with another broad rally that lifted all sectors. Seven of the nine sectors were up more than 1%. The Finance SPDR (XLF) led the way with a 2.40% gain. On the 60-minute charts, QQQ remains the strongest as it challenges its July (and 2011) highs. SPY surged on Wednesday with help from the finance sector. SPY is now within spitting distance of its July high. IWM is still lagging these two, but holding its breakout nonetheless. The gaps and breakouts still mark the first support zones to watch. The green dotted lines mark the first, and tentative, support levels to watch. The solid-thick green lines mark key supports, a break of which would totally negate the breakouts and put the bears back in charge of the short-term trend.
The 20+ year Bond ETF (TLT) remains a tough call right now. The ETF is testing support around 95 with a falling wedge over the last few days. Strength in stocks, oil and the Euro is weighing on bonds. Should strength continue, I would expect bonds to work their way lower. Watch for a surge above 96 to suggest otherwise.
The US Dollar Fund (UUP) broke support as the Euro Currency Trust (FXE) broke resistance. FXE edged above triangle resistance on Wednesday and surged on Thursday as the EU agreed to yet another bailout package for Greece. Broken resistance turns into the first support zone to watch around 141.5-142. I will mark key support at 140.50.
The 12-Month US Oil Fund (USL) edged above resistance at 45, but fell back below 45 by the close. There is still some resistance from the July highs in the 45-45.5 area that is coming into play. 44 is the first level to watch for a breakout failure. A move below Monday's low would trigger a bearish break down.
The Gold SPDR (GLD) continues to consolidate in the 154-156.5 area. Weakness in the Dollar could be helping gold here. There is a clear support level at 153.8 from the lows of the last few days. A break below this level would argue for a correction of the July advance.
Key Economic Reports:
Fri – None – TGIF!
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.
