Stocks remained under pressure with the Russell 2000 ETF (IWM) falling .75% and the S&P 500 SPDR (SPY) losing .12%. Selling pressure, however, was contained as the Dow Diamonds (DIA) ended the day with a small gain. The sectors were mixed with the Energy SPDR (XLE) falling .98% and the HealthCare SPDR (XLV) losing .56%. The rest of sector the gains and losses were fractional. Overall, stocks became oversold with Monday's big decline and firmed somewhat on Tuesday and Wednesday. The chart below shows daily candlesticks for SPY. After a long filled candlestick on Monday, the ETF firmed with two indecisive candlesticks in a row. The Monday-Tuesday pair form an harami and Wednesday's indecisive candle makes for an extended harami. This indecision could be setting up for an oversold bounce, or it could be just a rest before a continuation lower. Predicting the next few days is quite risky because we have the employment report on Friday. Even if we get an oversold bounce, I am expecting some sort of second dip later this month and perhaps an SPY low near 172 or 170, which is near the 200-day moving average. The indicator window shows StochRSI with resistance in the .5-.6 zone. A breakout here would be the first sign of a short-term trend reversal.
**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 - Feb 05 - 07:00 - MBA Mortgage Index
Wed - Feb 05 - 08:15 - ADP Employment Report
Wed - Feb 05 - 10:00 - ISM Services Index
Wed - Feb 05 - 10:30 - Crude Inventories
Thu - Feb 06 - 07:30 - Challenger Job Report
Thu - Feb 06 - 08:30 - Initial Jobless Claims
Thu - Feb 06 - 10:30 - Natural Gas Inventories
Fri - Feb 07 - 08:30 - Employment Report
Tue - Feb 11 - 08:30 - Yellen Testimony
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.
