Stocks closed lower again on Wednesday, but a late afternoon bounce pushed the major index ETFs off their lows. IWM and MDY actually closed with small gains as small and mid-caps held up well on Wednesday. QQQ and SPY closed fractionally lower. The Equal-Weight Consumer Discretionary ETF (RCD) led the sectors lower with a .97% loss. The Technology SPDR (XLK) and the Equal-weight Utilities ETF (RYU) were also down around 1%. Biotechs got a bounce as another deal was announced within the group. Bonds fell sharply again and the 20+ YR T-Bond ETF (TLT) is now down over 8% from its April high. The decline in bonds is a shock to the system that creates uncertainty, just like the surge in the Dollar last summer-fall. I am not sure, however, if this plunge in bonds and surge in yields is really bearish for stocks. The money going out of the bond market has to go somewhere, and that somewhere could just be stocks.
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
Short-term Overview (Thursday, 7-May-2015):
- Short-term breadth indicators are both bearish.
- All five equal-weight sectors are in downtrends.
- SPY broke short-term support to reverse the uptrend since early April.
- QQQ formed a lower high and broke support to reverse its volatile upswing.
- IWM continued its downtrend in relative and absolute performance.
- TLT remains in a steep short-term downtrend and is short-term oversold.
- UUP extended its short-term downtrend and I lowered key resistance.
- USO broke pennant resistance last week and hit a new high for the move on Tuesday.
- GLD bounced, but remains in a volatile short-term downtrend.
The Equal-Weight S&P 500 ETF (RSP) dipped below 81 intraday, but managed to close above 81 and keep the support zone alive. A lower high formed this week though and one could argue that a short-term downtrend is underway. Before getting too bearish, keep in mind that RSP is less than 3% from its late April high, which was a 52-week high.
The breadth indicators are both bearish. Just to keep things interesting, however, AD Percent finished near zero and AD Volume Percent finished at -28%. In other words, selling pressure was really not that intense on Wednesday. The 10-day SMAs for AD Percent and AD Volume Percent are in bear mode because both crossed below -5%. These bear signals will not reverse until they cross back above +5%.
All five equal-weight sector ETFs are in downtrends. The Equal-weight Technology ETF (RYT) was the last hold out and it broke support on Wednesday. Monday's highs now mark resistance for these sector ETFs.
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Key Reports and Events (all times Eastern):
Thu - May 07 - 07:30 - Challenger Job Report
Thu - May 07 - 08:30 - Initial Jobless Claims
Thu - May 07 - 10:30 - Natural Gas Inventories
Thu - May 07 - 15:00 - Consumer Credit
Fri - May 08 - 08:30 - Employment Report
Tue - May 12 - 00:00 - JOLTS
Wed - May 13 - 07:00 - MBA Mortgage Index
Wed - May 13 - 08:30 - Retail Sales
Wed - May 13 - 10:00 - Business Inventories
Wed - May 13 - 10:30 - Crude Oil Inventories
Thu - May 14 - 08:30 - Initial Jobless Claims
Thu - May 14 - 08:30 - Producer Price Index (PPI)
Thu - May 14 - 10:30 - Natural Gas Inventories
Fri - May 15 - 08:30 - Empire State Manufacturing
Fri - May 15 - 09:15 - Industrial Production
Fri - May 15 - 10:00 - Michigan Sentiment
Mon - May 18 - 10:00 - NAHB Housing Market Index
Tue - May 19 - 08:30 - Housing Starts/Building Permits
Wed - May 20 - 07:00 - MBA Mortgage Index
Wed - May 20 - 10:30 - Crude Oil Inventories
Wed - May 20 - 14:00 - FOMC Minutes
Thu - May 21 - 08:30 - Initial Jobless Claims
Thu - May 21 - 10:00 - Existing Home Sales
Thu - May 21 - 10:00 - Philadelphia Fed
Thu - May 21 - 10:00 - Leading Indicators
Thu - May 21 - 10:30 - Natural Gas Inventories
Fri - May 22 - 08:30 - Consumer Price Index (CPI)
Tue - May 26 - 08:30 - Durable Goods Orders
Tue - May 26 - 09:00 - Case-Shiller 20-city Index
Tue - May 26 - 09:00 - FHFA Housing Price Index
Tue - May 26 - 10:00 - New Home Sales
Tue - May 26 - 10:00 - Consumer Confidence
Wed - May 27 - 07:00 - MBA Mortgage Index
Thu - May 28 - 08:30 - Initial Jobless Claims
Thu - May 28 - 10:00 - Pending Home Sales
Thu - May 28 - 10:30 - Natural Gas Inventories
Thu - May 28 - 11:00 - Crude Oil Inventories
Fri - May 29 - 08:30 - GDP
Fri - May 29 - 09:45 - Chicago PMI
Fri - May 29 - 10:00 - Michigan Sentiment
This commentary is 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.
