**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
Selling pressure continued in both stocks and Treasuries on Monday. These two were negatively correlated most of the last two years, but have been positively correlated the last few weeks. Selling in both stocks and bonds is pushing money into alternatives, such as gold. While I still think this is a correction within a bigger uptrend, there is room for more weakness in the major index ETFs. Elsewhere, all sectors were down on Monday with the Finance SPDR (XLF) and Energy SPDR (XLE) leading the way. XLF may be affected by rising rates as well. XLE is weak even though oil prices remain at high levels. This suggests that oil prices may be vulnerable to a setback. Tensions in the Middle East have added a risk premium for oil. The materials sector was also hit with the Metals & Mining SPDR (XME) and the Coal Vectors ETF (KOL) falling over 2.5%. Note that the Nikkei 225 ($NIKK) fell 2.63% on Tuesday and the Hang Seng Index ($HSI) declined over 2%. Selling pressure is spreading to Asia and this could further dampen demand for basic materials.
be construed as a recommendation to buy, sell or sell-short said securities**
Selling pressure continued in both stocks and Treasuries on Monday. These two were negatively correlated most of the last two years, but have been positively correlated the last few weeks. Selling in both stocks and bonds is pushing money into alternatives, such as gold. While I still think this is a correction within a bigger uptrend, there is room for more weakness in the major index ETFs. Elsewhere, all sectors were down on Monday with the Finance SPDR (XLF) and Energy SPDR (XLE) leading the way. XLF may be affected by rising rates as well. XLE is weak even though oil prices remain at high levels. This suggests that oil prices may be vulnerable to a setback. Tensions in the Middle East have added a risk premium for oil. The materials sector was also hit with the Metals & Mining SPDR (XME) and the Coal Vectors ETF (KOL) falling over 2.5%. Note that the Nikkei 225 ($NIKK) fell 2.63% on Tuesday and the Hang Seng Index ($HSI) declined over 2%. Selling pressure is spreading to Asia and this could further dampen demand for basic materials.
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Key Reports and Events (all times Eastern):
Wed - Aug 21 - 07:00 - MBA Mortgage Index
Wed - Aug 21 - 10:00 - Existing Home Sales
Wed - Aug 21 - 10:30 - Crude Inventories
Wed - Aug 21 - 14:00 - FOMC Minutes
Thu - Aug 22 - 08:30 - Initial Claims
Thu - Aug 22 - 10:00 - Leading Indicators
Thu - Aug 22 - 10:30 - Natural Gas Inventories
Fri - Aug 23 - 10:00 - New Home Sales
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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