Stocks corrected the last two days with relatively mild selling pressure. The Russell 2000 ETF (IWM) lost .62% and the S&P 500 ETF (SPY) fell just .22%. IWM continues to show relative weakness over the last six weeks. The sectors were mixed with six down and three up. The Finance SPDR, Healthcare SPDR and Energy SPDR edged higher. It is quite positive to see relative strength from the finance sector. Note that Bank of America and JP Morgan hit new highs on Tuesday, while XLF hit a new high on Monday. Weakness in semis weighed on the tech sector as the Semiconductor SPDR (XSD) and Semiconductor Market Vectors ETF (SMH) both fell over 2%. With this decline, XSD broke flag support to signal a continuation of the late October gap-decline. Also notice that the price relative sank to multi-month lows as semis continue to show relative weakness. This is not a good sign for the tech sector, and perhaps the broader market because semis are a cyclical group. Today we get Retail Sales before the open and the Fed Minutes in the afternoon.
Note that the green annotations and lines mark bullish features, while the red annotations and lines highlight bearish features. The blue annotations and lines highlight patterns at work. Note that I am using the Aroon Oscillator instead of RSI on the IWM and QQQ charts. I focus mainly on the price chart because indicator signals are dependent on the time parameter. In any case, a 40-period Aroon Oscillator turns bullish with a move above 50 and stays bullish until there is a move below -50, which is bearish.
**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):
Wed - Nov 20 - 07:00 - MBA Mortgage Index
Wed - Nov 20 - 08:30 - Retail Sales
Wed - Nov 20 - 08:30 - Consumer Price Index (CPI)
Wed - Nov 20 - 10:00 - Existing Home Sales
Wed - Nov 20 - 10:00 - Business Inventories
Wed - Nov 20 - 10:30 - Oil Inventories
Wed - Nov 20 - 14:00 - FOMC Minutes
Thu - Nov 21 - 08:30 - Initial Jobless Claims
Thu - Nov 21 - 08:30 - Producer Price Index (PPI)
Thu - Nov 21 - 10:00 - Philadelphia Fed
Thu - Nov 21 - 10:30 - Natural Gas Inventories
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.
