Stocks continued higher on Monday, but late selling pressure hit in the final fifteen minutes. As a result of this late selling pressure, the Dow Industrials SPDR (DIA) formed a gravestone doji with a long upper shadow. Even though this shows a failed rally intraday, it is not enough to reverse the medium-term or even short-term uptrends. DIA remains within a rising wedge pattern and key support is set at 127.
The Nasdaq 100 ETF (QQQ), Nasdaq and the Technology SPDR (XLK) showed upside leadership on Monday. The FirstTrust Internet ETF (FDN), Networking iShares (IGN) and Powershares Software ETF (PSJ) were all up over 1%. FDN surged above the upper trend line of a triangle consolidation.
There is not much change on the 60-minute chart for the S&P 500 ETF (SPY). The trend remains up since mid June with each low punctuated by a gap higher. Actually, the most recent gap occurred above the lower trend line of the rising channel as buying pressure stepped in earlier. With today's move above 139, SPY exceeded the upper trend line of the rising channel and became a bit overbought. This does not weaken the trend, but it does increase the chances of a consolidation or pullback.
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No change. Money moved out of treasuries as the 20+ Year T-Bond ETF (TLT) declined to its late July low. The move broke channel support to reverse the three day advance. Even though the short-term trend for TLT is down, there is still possible support in the 127 area from broken resistance and the late July low. Also notice that the 10-year Treasury Yield ($TNX) is hitting resistance near broken support.
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The Dollar extended its losses on Monday and moved below its late July low. A falling wedge may be taking shape, but it is clearly falling. Keep in mind that the medium-term and long-term trends are up, which makes this short-term downtrend a correction within a bigger uptrend. There are no signs of support yet and RSI remains below 60.
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No change. Strength in the stock market and weakness in the Dollar boosted oil as the US Oil Fund (USO) broke above resistance at 33.50. Also notice that USO held support at 32.5 and RSI held support at 40. These two levels hold the key for the short-term uptrend.
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No change. The Gold SPDR (GLD) also moved higher on Friday, but the surge was not that impressive. GLD ultimately held support near broken resistance and broke the falling wedge trend line. This move reinforces support in the 154 area. A break below 153.5 would clearly negate this breakout and put the bears back in control.
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Key Reports and Events:
Wed - Aug 08 - 07:00 - MBA Mortgage Index
Wed - Aug 08 - 10:30 - Oil Inventories
Thu - Aug 09 - 08:30 - Jobless Claims
Thu - Aug 09 - 10:00 - Wholesale Inventories
Fri – Aug 31 – 09:00 – Jackson Hole Central Bank Symposium
Charts of Interest: Tuesday and Thursday
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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