A Bearish Failure Swing Lurks in SPY - FXE Forms Bear Flag

The sectors were mixed with three up, five down and one unchanged. There were some sizable moves within the industry group ETFs. The Networking iShares (IGN) and the Metals & Mining SPDR (XME) fell over 1%, while the Airline ETF (FAA) and the Solar Energy ETF (TAN) advanced over 1%. Oil related stocks were also fairly strong as Spot Light Crude ($WTIC) challenged the $97 area. Stocks will get a test today because the Euro is down sharply this morning. Bloomberg reports: "the euro-area recession deepened more than economists forecast with the worst performance in almost four years as its three biggest economies suffered slumping output". Further strength in the Dollar would be negative for commodities, and possibly stocks. Watch Treasuries for clues on stocks. An upside breakout in the 20+ Year T-Bond ETF (TLT) would suggest that the long-overdue stock market correction is at hand.



The chart below shows SPY with a bearish failure swing working in RSI. According to Wilder, creator of RSI, a bearish failure swing occurs when RSI moves above 70, declines below 70 and then fails to exceed 70 on the next bounce. Also notice that SPY moved to a new high and RSI has yet to make it back above 70. The bearish failure swing would be confirmed should RSI break below its prior low (early February). 









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Key Reports and Events:

Thu - Feb 14 - 08:30 - Jobless Claims
Thu - Feb 14 - 10:30 - Natural Gas Inventories        
Fri - Feb 15 - 08:30 – Empire State Manufacturing        
Fri - Feb 15 - 09:15 - Industrial Production/Utilization        
Fri - Feb 15 - 09:55 - Michigan Sentiment    
Sun - Feb 24 - 10:00 – Italian Parliamentary Elections 
Fri – Mar 01 - 23:59 – Sequester Takes Effect (unless...)    
Wed – Mar 27 - 23:59 – Government Shut Down Deadline
Wed – May 15 - 23:59 – New Debt Ceiling Deadline

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.