SPY and QQQ remain in short-term uptrends, but stocks are in a December funk of sorts. Small-caps are lagging as IWM filled its gap and failed to hold its breakout. As shown yesterday, the S&P 500 AD Line formed a bearish divergence and broke support. In Tuesday's trading, we saw a strong open in the Home Construction SPDR (ITB) and a weak close. Toll Brothers (TOL) opened over 3% higher after earnings and then closed lower for the day. Even though TOL failed at resistance, it has yet to break the early December low and reverse the two month uptrend. Parts of the tech sector continue to hold up relatively well as the Semiconductor SPDR (XSD) and Internet ETF (FDN) both gained on the day. The Gold Miners SPDR (GDX) surged as gold broke above its early December high. Perhaps gold is finally taking notice of pervasive weakness in the Dollar. I also think gold is reacting to strength in the 20+ YR Treasury Bond ETF (TLT). Even though Friday's employment report was strong and last week's economic indicators showed strong growth, Treasuries managed to firm at the end of last week and bounce this week. The market could be waiting for the next catalyst, which is the retail sales report on Thursday before the open. A weak pre-holiday report would likely weigh on retailers and the market as a whole. It is certainly possible that we get a weak report because the discounts were so deep on black Friday weekend.
**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 - Dec 11 - 07:00 - MBA Mortgage Index
Wed - Dec 11 - 10:30 - Crude Oil Inventories
Thu - Dec 12 - 08:30 - Initial Jobless Claims
Thu - Dec 12 - 08:30 - Retail Sales
Thu - Dec 12 - 10:00 - Business Inventories
Thu - Dec 12 - 10:30 - Natural Gas Inventories
Fri - Dec 13 - 08:30 - Producer Price Index (PPI)
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.
