There is not much change on the 60-minute chart for SPY. The ETF broke flag resistance with a surge late last week and then consolidated the last two days. The breakout is holding with first support marked at 127.20. While a move below this level would also break the trendline extending up from December 20th, I am leaving key support in the 126-126.5 area and will not turn short-term bearish until a break below this level. Support here stems from broken resistance and last week's trough. RSI remains in bull mode with support at 40.
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The 20+ Year T-Bond ETF (TLT) bounced off support and broke short-term resistance, but did not hold this breakout and fell back below 119. I suspect that strength in stocks is weighing on treasuries and further strength in stocks would lead to a support break. The bounce above 119 looks like a small rising flag. Further weakness below 118.2 would complete the flag break and increase the chances of a break below the late December low.
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The US Dollar Fund (UUP) pulled back after breaking resistance and becoming overbought. Broken resistance turns into the first support zone around 22.55-22.60 and RSI has support in the 40-50 zone. Spain and Italy will test the bond market with auctions on Thursday. The resulting yields on these new bonds will affect the Euro.
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The US Oil Fund (USO) moved lower on Monday, but formed a falling wedge over the last few days. This wedge retraced 61.80% of the prior advance and the ETF remains just above key support. RSI bounced off its support zone as USO broke the upper trendline of the wedge. Even though a strong Dollar could weigh on commodities, I expect oil to hold up as long as the stock market remains strong.
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Gold continues to consolidate near resistance, which is a sign of strength. The ability to surge to resistance and hold near resistance indicates sustained buying pressure. A small falling wedge formed the last two days and a break above wedge resistance would signal a continuation higher. This would also break the bigger resistance zone and argue for a continuation of the late December surge.
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Key Economic Reports:
Tue - Jan 10 - 10:00 - Wholesale Inventories
Wed - Jan 11 - 07:00 - MBA Mortgage Purchase Index
Wed - Jan 11 - 10:30 - Oil Inventories
Wed - Jan 11 - 14:00 - Fed Beige Book
Thu - Jan 12 - 08:30 - Jobless Claims
Thu - Jan 12 - 08:30 – Spain and Italy Bond Auction
Thu - Jan 12 - 08:30 - Retail Sales
Thu - Jan 12 - 10:00 - Business Inventories
Fri - Jan 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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