Stocks remained mixed and directionless on Tuesday. The Dow Industrials SPDR (DIA) and S&P 500 ETF (SPY) edged lower, while the Russell 2000 ETF (IWM) and S&P MidCap 400 SPDR (MDY) edged higher. The latter two were up around a 1/2 percent. Three sectors were up and six were down. The Consumer Discretionary SPDR (XLY), Energy SPDR (XLE) and Consumer Staples SPDR (XLP) edged higher, while the rest edged lower. It was a pretty uneventful day that kept existing trends in place. Of note, the Retail SPDR (XRT) moved higher and extended on its falling channel breakout. The advance since the breakout has been choppy, but it is an advance nonetheless. Broken resistance turns into first support in the 59.50 area.
There are no real changes on the charts. At this point, we are simply in the monitoring phase. IWM, QQQ and SPY broke out of short-term consolidations and these breakouts are holding. They have not ventured far from the breakouts, but the breakouts are bullish until proven otherwise. The S&P 500 ETF (SPY) pulled back and formed a bull flag from Tuesday morning to the close on Thursday. With a surge on Friday, the ETF broke flag resistance to signal a continuation higher. The correction or pullback was less than three days, which is actually typical for a strong uptrend. At this point, the flag breakout needs to hold. A quick move back below 140.80 would negate the breakout and put the ETF back in corrective mode. I am setting key support in the 138.5-139 area. The Raff Regression Channel extends up from the mid July low to the late August high. The lower line of this channel ends at 138.50 to mark support. There is also support in this area from broken resistance.
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No change. Treasuries are going to have to give up their rally if stocks are to continue theirs. After becoming oversold near 121, the 20+ Year T-Bond ETF (TLT) surged above channel resistance and this breakout is holding. I am marking resistance in the 126.50 area. First support is set at 124.5 and a break below this level would suggest a move towards the risk-on trade.
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No change. The US Dollar Fund (UUP) became very oversold last week as 30-period RSI on the 60-minute chart moved below 30 for the first time this year and 14-day RSI moved below 30 for the first time since February. The ETF bounced on Friday, even as stocks rallied. Even though I still consider the bigger trend up, the short-term trend remains down with first resistance at 22.47.
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No change. The US Oil Fund (USO) corrected back to broken resistance and then bounced back above 35.50 on Monday afternoon. A falling flag is taking shape and follow through above 35.75 would break flag resistance. RSI is also finding support in the 40-50 zone. This is the spot for USO to hold and continue higher. A little help from the stock market (up) and Dollar (down) may be needed though.
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No change. The Gold SPDR (GLD) broke resistance with a big move on Tuesday and surged above 162. GLD is short-term overbought after a 4.5% surge in less than two weeks. Also note that weakness in the Dollar helped gold and a bounce in the Dollar could hurt. Broken resistance turns into the first support zone in the 157-158 area. Key support remains at 153.50.
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Key Reports and Events:
Wed - Aug 29 - 07:00 - MBA Mortgage Index
Wed - Aug 29 - 08:30 - GDP
Wed - Aug 29 - 10:00 - Pending Home Sales
Wed - Aug 29 - 10:30 - Oil Inventories
Wed - Aug 29 - 14:00 - Fed's Beige Book
Thu - Aug 30 - 08:30 - Jobless Claims
Thu - Aug 30 - 08:30 - Personal Income & Spending
Fri - Aug 31 - 09:45 - Chicago Purchasing Managers Index (PMI)
Fri - Aug 31 - 09:55 - Michigan Sentiment
Fri - Aug 31 - 10:00 - Factory Orders
Fri – Aug 31 – 10:00 – Bernanke Speaks from Jackson Hole Central Bank Symposium
Thu – Sep 06 – 14:30 – European Central Bank (ECB) Meeting
Tue – Sep 11 – 09:00 – Troika to Greece
Wed – Sep 12 – 09:00 – German Constitutional Court Ruling
Wed – Sep 12 – 14:15 – FOMC Policy Statement
Sat – Oct 06 – 09:00 – EU Summit
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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