The major index ETFs closed lower as stocks were hit with some pretty strong selling pressure Friday afternoon. The S&P 500 ETF (SPY) led the way with a 1.44% decline. All sectors were down with the Healthcare SPDR (XLV), Consumer Staples SPDR (XLP) and Utilities SPDR (XLU) losing around 2%. The Finance SPDR (XLF) was also relatively weak with a 1.64% decline on the day. The Basic Materials SPDR (XLB) got whacked as the Steel ETF (SLX), Metals & Mining SPDR (XME) and Gold Miners ETF (GDX) fell over 2%. Relative weakness in the stocks and currencies of emerging markets seems to be hitting this sector hard. With Friday's decline, the AD Line and the AD Volume Line for the S&P 500 are in short-term downtrends. As noted last week, the AD Line had already broken down, but the AD Volume Line was holding up. Well, the AD Volume Line broke support with Friday's decline and the S&P 500 confirmed with a support break of its own. Trading could be quite volatile this week because we have a slew of economic reports. The ISM Index and Auto-Truck Sales kick it off on Monday. Wednesday is a big day with ISM Services, the Beige Book and Factory Orders. The week ends with the employment report, which holds the key to the future of quantitative easing.
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Key Reports and Events (all times Eastern):
Mon - Jun 03 - 10:00 - ISM Index
Mon - Jun 03 - 10:00 - Construction Spending
Mon - Jun 03 - 14:00 - Auto/Truck Sales
Wed - Jun 05 - 07:00 - MBA Mortgage Index
Wed - Jun 05 - 08:15 - ADP Employment Change
Wed - Jun 05 - 10:00 - Factory Orders
Wed - Jun 05 - 10:00 - ISM Services
Wed - Jun 05 - 10:30 - Crude Inventories
Wed - Jun 05 - 14:00 - Fed's Beige Book
Thu - Jun 06 - 07:30 - Challenger Job Cuts
Thu - Jun 06 - 08:30 - Initial Claims
Thu - Jun 06 - 10:30 - Natural Gas Inventories
Fri - Jun 07 - 08:30 - Nonfarm Payrolls
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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