There is no change in the SPY trends so I will add coverage of the 10-year Treasury Yield ($TNX), Euro Currency Trust (FXE) and Gold SPDR (GLD) today. Interest rates remain in an uptrend overall and the 10-year Treasury Yield has been consolidating since mid December. Support resides at 3.25% and resistance at 3.5%. With the bigger trend up, I expect support to hold and interest rates to move higher (bonds lower). A break above the early January high would signal a continuation of the uptrend in interest rates. An escalation of European debt concerns could throw cold water on this scenario. Another debt crisis could prompt a flight to safety and move into bonds, which would send rates lower.
The Euro Currency Trust broke down last week and rebounded somewhat this week. News that China and Japan would buy EU debt could be helping the Euro. Investor appetite for bonds will be tested this week as Portugal auctions some E1.25 billion today, Spain offers some E3 billion on Thursday and Italy tries to raise some E6 billion on Thursday. Good demand could increase investor confidence and give the Euro a bounce back to the 130-131 area. Broken supports and a 38-50% retracement of the prior decline mark resistance in this area. It is a big area, but these are volatile times.
And what about gold? The Gold SPDR (GLD) declined sharply last week as the Dollar advanced (green line). GLD hit support at 133 and consolidated for a few days. With the Dollar edging lower the last two days, GLD broke above consolidation resistance. This reinforces support at 133. For now, I view the consolidation breakout as short-term bullish until proven otherwise. An oversold bounce in the Euro (pullback in the Dollar) could lift gold further. Failure to hold the breakout and a move below 133 would signal a continuation of last week's decline. Charting note: I overlaid a 1-day SMA to take away the gaps. By the time GLD opens for trading, gold has already been moving in Asia, Europe and on the US futures markets.
There is no change in the analysis for the medium-term (daily chart) or short-term (60-minute chart). SPY remains in a medium-term uptrend as the ETF recorded a new 52-week high last week. SPY started the week strong with an open above 126, but then stalled the rest of the week. There were three red candlesticks (down days) and two black candlesticks (up days). Even though buying pressure subsided, selling pressure did not intensify and the ETF closed above 127 on Friday. The 60-minute charts hold the key to a pull back or correction. Should one take hold, broken resistance around 122 marks the first support level to watch.
On the 60-minute chart, SPY remains in a rising price channel with key support at 126. The ETF bounced off this level twice last week and RSI bounced off 40 on Friday. A move below 126 would break channel support and most likely push RSI below 40. The combination would signal a short-term trend reversal and the start of a correction on the daily chart. I will also be watching the breadth indicators above for confirmation.
Key Economic Reports:
Wed - Jan 12 - 07:00 - MBA Mortgage Purchase Index
Wed - Jan 12 - 10:30 - Crude Inventories
Wed - Jan 12 - 14:00 - Fed's Beige Book
Thu - Jan 13 - 08:30 - Initial Claims
Thu - Jan 13 - 08:30 - PPI
Fri - Jan 14 - 08:30 - CPI
Fri - Jan 14 - 08:30 - Retail Sales
Fri - Jan 14 - 09:15 - Industrial Production
Fri - Jan 14 - 10:00 - Business Inventories
Charts of Interest: Tuesday and Thursday in separate post.
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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.
And what about gold? The Gold SPDR (GLD) declined sharply last week as the Dollar advanced (green line). GLD hit support at 133 and consolidated for a few days. With the Dollar edging lower the last two days, GLD broke above consolidation resistance. This reinforces support at 133. For now, I view the consolidation breakout as short-term bullish until proven otherwise. An oversold bounce in the Euro (pullback in the Dollar) could lift gold further. Failure to hold the breakout and a move below 133 would signal a continuation of last week's decline. Charting note: I overlaid a 1-day SMA to take away the gaps. By the time GLD opens for trading, gold has already been moving in Asia, Europe and on the US futures markets.
There is no change in the analysis for the medium-term (daily chart) or short-term (60-minute chart). SPY remains in a medium-term uptrend as the ETF recorded a new 52-week high last week. SPY started the week strong with an open above 126, but then stalled the rest of the week. There were three red candlesticks (down days) and two black candlesticks (up days). Even though buying pressure subsided, selling pressure did not intensify and the ETF closed above 127 on Friday. The 60-minute charts hold the key to a pull back or correction. Should one take hold, broken resistance around 122 marks the first support level to watch.
On the 60-minute chart, SPY remains in a rising price channel with key support at 126. The ETF bounced off this level twice last week and RSI bounced off 40 on Friday. A move below 126 would break channel support and most likely push RSI below 40. The combination would signal a short-term trend reversal and the start of a correction on the daily chart. I will also be watching the breadth indicators above for confirmation.
Key Economic Reports:
Wed - Jan 12 - 07:00 - MBA Mortgage Purchase Index
Wed - Jan 12 - 10:30 - Crude Inventories
Wed - Jan 12 - 14:00 - Fed's Beige Book
Thu - Jan 13 - 08:30 - Initial Claims
Thu - Jan 13 - 08:30 - PPI
Fri - Jan 14 - 08:30 - CPI
Fri - Jan 14 - 08:30 - Retail Sales
Fri - Jan 14 - 09:15 - Industrial Production
Fri - Jan 14 - 10:00 - Business Inventories
Charts of Interest: Tuesday and Thursday in separate post.
-----------------------------------------------------------------------------
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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