As noted yesterday, the medium-term trend was up because of the resistance breakout in October. This breakout can be seen on a daily chart. Broken resistance in the 122-124 area turned into support and held after the Throwback. The yellow area marks this Throwback on the 60-minute chart. Even though this decline was rather deep on a short-term basis, the medium-term uptrend ultimately pulled trump and the short-term uptrend resumed with the break above 126 last week. The advance from 122 looked like a rising flag last week, which is a potentially bearish pattern. This week's consolidation breakout nixed that pattern and is clearly short-term bullish. Broken resistance and the trendline mark first support just below 126. Key support is set at 124. I would also mark RSI support at 45.
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Strength in stocks and the Euro weighed on the 20+ year Bond ETF (TLT) over the last five days. TLT broke resistance with a big surge above 119, but fell back with a zigzag decline. Even though a Falling Flag or Falling Wedge may be taking shape, the short-term trend is down as long as this flag/eedge falls. A move above Monday's high would reverse this downtrend. Again, watch the Euro and stock market. Strength in both is bearish for Treasuries, but weakness in both would be bullish.
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The US Dollar Fund (UUP) remains within a Falling Flag pattern. As with TLT above, the surge and breakout were considered bullish, which meant the decline over the last six days is a corrective pattern or bullish continuation pattern. Most of the surge is holding because the consolidation is fairly flat. A move above 21.80 would break flag resistance and signal a continuation higher. Such a move could be negative for stocks and positive for Treasuries. However, it has yet to actually happen.
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The US Oil Fund (USO) remains on a tear and in a clear uptrend. The ETF surged above 36 in late October, formed a Falling Flag into early November and broke flag resistance with a surge the last week and a half. The broken resistance zone around 36-36.50 turns into the first support zone. Watch this level on any Throwback. Key support remains at 34.50 for now.
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Gold made the most of the flat greenback. The Dollar edged lower from November 1st to 8th, but is not down by much. Even so, the Gold SPDR (GLD) surged from 164 to 175 during this timeframe. Gold is likely attracting money as an alternative to the Euro, which is surrounded by uncertainty. There are recent reports that central banks in Bolivia, Kazakhstan, Russia and Tajikistan increased their holdings. On the price chart, broken resistance turns into first support in the 170 area. Key support remains in the 163 area for now.
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Key Economic Reports:
Wed - Nov 09 - 07:00 - MBA Mortgage Index
Wed - Nov 09 - 10:00 - Wholesale Inventories
Wed - Nov 09 - 10:30 - Oil Inventories
Thu - Nov 10 - 08:30 - Jobless Claims
Fri - Nov 11 - 09:55 - Michigan Sentiment
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.
