Technically, SPY is in a medium-term uptrend after the October breakout in the 122-124 area. This breakout can be seen on the daily chart below. Broken resistance turns into support and the ETF is currently testing this support zone with two declines into the 122-124 area. After a sharp advance in October (108 to 128), the ETF was clearly overbought and ripe for a consolidation or even a pullback. It looks like we are getting that consolidation now. The resistance breakout is holding as long as the 122-124 zone holds. A close below this level would negate the breakout and this would have consequences for the medium-term uptrend.
Turning to the 60-minute chart, I am focusing on Thursday's consolidation. After becoming oversold with a gap and sharp decline on Wednesday, the ETF consolidated with a small rising wedge on Thursday. A move below 123.5 would break rising wedge support and further weakness below 123 would break the triangle trendline. This would signal a continuation of Wednesday's decline and target a move to the 119-120 area. With triangle support possible near current levels, chartists should also be prepared for a possible bounce off support. A move above 125.5 would clear the way for a successful support test.
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The 20+ year Bond ETF (TLT) surged to 119 when stocks opened weak on Wednesday, but did not close strong, even though stocks closed weak. With stocks moving higher on Thursday, bonds got hit rather hard as TLT declined around 1.5%. Overall, the pattern at work still looks like a falling flag. It is just bigger now. A break above this week's high would signal a continuation higher. I think the surge in oil prices is also weighing on bonds because this is inflationary.
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The US Dollar Fund (UUP) surged above resistance, formed a falling flag and broke flag resistance with a surge this week. The breakout is holding and remains bullish until proven otherwise. Broken resistance from the flag highs turns into first support. The flag lows mark key support. RSI also turned bullish with the breakout out at the beginning of November and support is set in the 40-50 zone.
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The US Oil Fund (USO) remains strong with another big gain on Thursday. Oil held up well when stocks tanked on Wednesday and buyers were eager to step right back in. Flag resistance turns into a support zone in the 36-36.5 area and this is the first area to watch on any pullback. Key support remains at 34.50.
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The Gold SPDR (GLD) became overbought after the surge from 156 to 175 and is now in corrective mode. The decline over the last few days returned to broken resistance and this area turned into support around 170. While this is the first area to expect a bounce, a lot may depend on the Dollar. Further strength in the Dollar, such as a continuation of the flag breakout, would likely be negative for gold.
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Key Economic Reports:
Fri - Nov 11 - 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.
**************************************************************************
The 20+ year Bond ETF (TLT) surged to 119 when stocks opened weak on Wednesday, but did not close strong, even though stocks closed weak. With stocks moving higher on Thursday, bonds got hit rather hard as TLT declined around 1.5%. Overall, the pattern at work still looks like a falling flag. It is just bigger now. A break above this week's high would signal a continuation higher. I think the surge in oil prices is also weighing on bonds because this is inflationary.
**************************************************************************
The US Dollar Fund (UUP) surged above resistance, formed a falling flag and broke flag resistance with a surge this week. The breakout is holding and remains bullish until proven otherwise. Broken resistance from the flag highs turns into first support. The flag lows mark key support. RSI also turned bullish with the breakout out at the beginning of November and support is set in the 40-50 zone.
**************************************************************************
The US Oil Fund (USO) remains strong with another big gain on Thursday. Oil held up well when stocks tanked on Wednesday and buyers were eager to step right back in. Flag resistance turns into a support zone in the 36-36.5 area and this is the first area to watch on any pullback. Key support remains at 34.50.
**************************************************************************
The Gold SPDR (GLD) became overbought after the surge from 156 to 175 and is now in corrective mode. The decline over the last few days returned to broken resistance and this area turned into support around 170. While this is the first area to expect a bounce, a lot may depend on the Dollar. Further strength in the Dollar, such as a continuation of the flag breakout, would likely be negative for gold.
**************************************************************************
Key Economic Reports:
Fri - Nov 11 - 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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