Stocks are moving in sync with the Euro and commodities, both of which have been falling this month. The Euro is under pressure with concerns over Greek debt. Oil is under pressure because the Dollar is rising and stocks have weakened this month. US Treasuries are attracting money as a safe-haven. The chart below shows the performance of five intermarket assets this month. The Dollar and Bonds are up, while stocks, commodities and gold are down. May has seen a return to the risk-off trade.
On the daily chart, SPY bounced off support and fell back rather sharply on Wednesday. This could be just two steps forward and one step back. However, selling pressure was rather intense as a long black candlestick formed. This step back looked a little too big. The indicator window shows StochRSI moving below .20 for the first time since mid April. I view this as short-term negative for momentum.
On the 60-minute chart, SPY formed a rising flag over the last few days. As noted Wednesday morning, this flag retraced around 62% of last week's decline. Also notice that RSI met resistance at 65, which is the upper level of the bearish zone. With SPY failing at a key retracement and RSI failing at bear zone resistance, the odds are turning in favor of the bears. SPY managed a bounce near the close to stave off a support break at 134. Another move below this level would break flag support and argue for a continuation last week's decline.
Key Economic Reports/Events:
Wed - May 11 - 07:00 - MBA Mortgage Index
Wed - May 11 - 10:30 - Oil Inventories
Thu - May 12 - 08:30 - Jobless Claims
Thu - May 12 - 08:30 - Producer Price Index (PPI)
Thu - May 12 - 08:30 - Retail Sales
Thu - May 12 - 10:00 - Business Inventories
Fri - May 13 - 08:30 - Consumer Price Index (CPI)
Fri - May 13 - 09:55 - Michigan Sentiment
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.
On the 60-minute chart, SPY formed a rising flag over the last few days. As noted Wednesday morning, this flag retraced around 62% of last week's decline. Also notice that RSI met resistance at 65, which is the upper level of the bearish zone. With SPY failing at a key retracement and RSI failing at bear zone resistance, the odds are turning in favor of the bears. SPY managed a bounce near the close to stave off a support break at 134. Another move below this level would break flag support and argue for a continuation last week's decline.
Key Economic Reports/Events:
Wed - May 11 - 07:00 - MBA Mortgage Index
Wed - May 11 - 10:30 - Oil Inventories
Thu - May 12 - 08:30 - Jobless Claims
Thu - May 12 - 08:30 - Producer Price Index (PPI)
Thu - May 12 - 08:30 - Retail Sales
Thu - May 12 - 10:00 - Business Inventories
Fri - May 13 - 08:30 - Consumer Price Index (CPI)
Fri - May 13 - 09:55 - Michigan Sentiment
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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