The markets moved from pre-election risk to post-election fear. Stocks, oil, copper and the Euro moved lower. Treasuries, the Dollar and gold moved higher. Yes, it is rare, and potentially stock market bearish, to see both gold and the Dollar moving higher. The finance sector was hit on the prospects that Dodd-Frank implementation will continue. In particular, regional banks were clobbered as the Regional Bank SPDR (KRE) fell almost 4%. The Utilities SPDR (XLU) plunged over 2% on fears of a tax increase on dividends. The Coal Vectors ETF (KOL) sank 5.49% on the prospects of more regulation from the EPA. KOL had an inverse head-and-shoulders pattern in play, but never broke neckline resistance. Wednesday's gap and plunge below support reverses the two month uptrend to signal a continuation of the bigger downtrend.
SPY failed at broken support and the early November high in the 143-143.50 area. There are two peaks now marking key resistance. After hitting resistance, SPY plunged through the late October lows with a sharp decline on Wednesday. Broken support here turns into the first resistance level in the 141 area. SPY is now short-term oversold and we could see a short consolidation or bounce. The indicator window shows the 10-year Treasury Yield ($TNX) and the Euro Currency Trust (FXE) falling along with the stock market.
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The 20+ Year T-Bond ETF (TLT) surged to its mid October high with a big move on Wednesday. This is no doubt a flight to safety as the markets turned risk off. The pink channel defines the current uptrend. Broken resistance turns first support in the 123 area. Key support is set at 121.75 for now. The plunge in oil reduces inflationary pressures and this is positive for treasuries.
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No change. The US Dollar Fund (UUP) surged to resistance in late October, consolidated and broke out with a surge on Friday. Perhaps the prospects of less quantitative easing triggered this buying binge. An improving economy and labor market put less pressure on the Fed for quantitative easing, which means less Dollar dilution. I am showing a longer 60-minute chart to highlight the magnitude of this breakout, which is medium-term bullish. Broken resistance turns first support in the 21.95 area. Key support is set at 21.85 for now.
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The US Oil Fund (USO) plunged along with the stock market and gave back all of its gains from Tuesday. This simply affirms the downtrend that has been in place since mid September. I am leaving key resistance at 33.50 to account for the mid September trend line. Dollar strength and stock market weakness are bearish for oil.
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Even though the Dollar edged higher and stocks plunged, gold held its own and the Gold SPDR (GLD) edged higher. It is relatively rare to see the Dollar and gold move higher. Even though a positive Dollar/gold correlation does not usually last long, it is a bearish development for stocks because it signals a most serious risk aversion. GLD broke the upper trend line of the falling channel, but has yet to complete a short-term trend reversal. Follow through above 168 is needed to fully reverse the downtrend.
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Key Reports and Events:
Thu - Nov 08 - 08:30 - Jobless Claims
Fri - Nov 09 - 09:55 - Michigan Sentiment
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.
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The 20+ Year T-Bond ETF (TLT) surged to its mid October high with a big move on Wednesday. This is no doubt a flight to safety as the markets turned risk off. The pink channel defines the current uptrend. Broken resistance turns first support in the 123 area. Key support is set at 121.75 for now. The plunge in oil reduces inflationary pressures and this is positive for treasuries.
**************************************************************************
No change. The US Dollar Fund (UUP) surged to resistance in late October, consolidated and broke out with a surge on Friday. Perhaps the prospects of less quantitative easing triggered this buying binge. An improving economy and labor market put less pressure on the Fed for quantitative easing, which means less Dollar dilution. I am showing a longer 60-minute chart to highlight the magnitude of this breakout, which is medium-term bullish. Broken resistance turns first support in the 21.95 area. Key support is set at 21.85 for now.
**************************************************************************
The US Oil Fund (USO) plunged along with the stock market and gave back all of its gains from Tuesday. This simply affirms the downtrend that has been in place since mid September. I am leaving key resistance at 33.50 to account for the mid September trend line. Dollar strength and stock market weakness are bearish for oil.
**************************************************************************
Even though the Dollar edged higher and stocks plunged, gold held its own and the Gold SPDR (GLD) edged higher. It is relatively rare to see the Dollar and gold move higher. Even though a positive Dollar/gold correlation does not usually last long, it is a bearish development for stocks because it signals a most serious risk aversion. GLD broke the upper trend line of the falling channel, but has yet to complete a short-term trend reversal. Follow through above 168 is needed to fully reverse the downtrend.
**************************************************************************
Key Reports and Events:
Thu - Nov 08 - 08:30 - Jobless Claims
Fri - Nov 09 - 09:55 - Michigan Sentiment
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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