The bull stampede continued last week as the Nasdaq 100 ETF (QQQ) led the major index ETFs to new highs. All sectors were higher last week with the Finance SPDR (XLF) and Energy SPDR (XLE) leading the charge. Finance is the big story because this sector went from relative weakness to relative strength over the last two weeks. Also note that XLE and the Oil & Gas Equipment & Services SPDR (XES) surged to new 52-week highs even though oil moved lower the last two weeks. There are few, if any, pockets of weakness in the market right now. In fact, the only thing the bulls have to fear is bullishness itself. Traders can be wary of excessive optimism, but sentiment is hard to quantify and markets can remain excessively bullish for extended periods. I prefer to trade on the charts and the trends. Right now the medium-term and short-term trends are up for the major index ETFs with no signs of weakness. The short-term trend is ripe for a rest or even a pullback, but timing such a pull is tricky business now that the bulls are out. It is going to be an unusual week because the employment report is Tuesday. Yes, you read right. Non-farm payrolls will be reported on Tuesday before the open. It is also going to be an important week for homebuilders with existing home sales on Monday, the MBA mortgage index on Wednesday and new home sales on Thursday.
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
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Key Reports and Events (all times Eastern):
Mon - Oct 21 - 10:00 - Existing Home Sales
Mon - Oct 21 - 10:30 - Crude Inventories
Tue - Oct 22 - 08:30 - Nonfarm Payrolls
Tue - Oct 22 - 10:30 - Natural Gas Inventories
Wed - Oct 23 - 07:00 - MBA Mortgage Index
Wed - Oct 23 - 10:30 - Crude Inventories
Thu - Oct 24 - 08:30 - Initial Claims
Thu - Oct 24 - 10:00 - New Home Sales
Thu - Oct 24 - 10:30 - Natural Gas Inventories
Fri - Oct 25 - 08:30 - Durable Orders
Fri - Oct 25 - 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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