After hitting new highs for the move early Tuesday, stocks weakened over the last two days with the Technology SPDR (XLK) and Energy SPDR (XLE) leading the way lower. Over the last three days, the S&P 500 ETF (SPY) formed a reversal with a gap up, consolidation and gap down. Despite this little reversal, the ETF has yet to break short-term support, which was raised again today. The short-term trends are still up, but stocks are quite overbought and I will be watching short-term support levels for a reversal. Keep in mind that I am talking about the short-term, not the medium or long-term uptrends. I am also seeing a little weakness in the S&P 1500 AD Volume Line ($SUPUDP). First, notice that the AD Volume Line did not exceed its September high and formed a lower high. This is a bearish divergence or non-confirmation of the higher high in the S&P 1500. Second, notice that the AD Volume Line broke a short-term support level, albeit a very short-term support level. Third, notice that AD Volume Percent barely ticked up on Tuesday (red arrow). Buying pressure is waning here and this could give way to a corrective period for the stock market.
**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):
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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