It could be a volatile week, but what else is new. EU finance ministers are meeting to discuss the Greek debt situation because Greece is facing a large rollover in March. The Fed meets on Tuesday-Wednesday with a policy statement expected on Wednesday afternoon. Red-hot housing stocks will be in the spotlight with slew of housing related reports on Wednesday. Alas, this is fundamental stuff and we will defer to the price charts for the real story. Stocks remains in short-term uptrends that began way back on December 20th. SPY gapped up, broke resistance on this fateful day and never looked back. The Santa Clause rally turned into the yearend rally and extended into the January effect. Actually, the January effect suggests that small-caps outperform in January. Indeed, the market capitalization PerfChart shows the S&P MidCap 400 SPDR (MDY) and the S&P SmallCap 600 ($SML) outperforming the S&P 500 year-to-date. On the price chart, the S&P 500 ETF (SPY) remains in a clear uptrend and closed at its highest (closing) level of the year. This allows for another extension of the Raff Regression Channel. There are several reasons to expect support in the 128-130 area. Broken resistance, the Raff Regression Channel, Monday's gap and the mid January lows combine to mark support here. Also note that RSI has held above 40 since December 20th.
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It was a rough week for treasuries as the 20+ Year T-Bond ETF (TLT) fell from 121.5 to 117 in just a few days. TLT broke support from the late December lows in the process. Strength in the Euro and stock market contributed to this slide. Relatively strong economic reports are also weighing as the Fed meeting looms this week. I am marking first resistance at 118.50 for now.
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The Dollar fell along with treasuries last week as the US Dollar Fund (UUP) broke support at 22.55 on Wednesday. Despite this support break, the bigger trend is up with lots of support in the 22.25 area. A steep falling flag may be taking shape with first resistance marked at 22.45. With the EU finance ministers meeting and the FOMC statement looming, this could be a volatile week for the Dollar and Treasuries.
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The US Oil Fund (USO) continues to underperform the stock market and remains under selling pressure. After an opening surge above 39.5 to start the year, the ETF has worked its way lower the last three weeks. The rising wedge advance last week peaked near the 61.80% retracement and the ETF broke down again on Friday. Also notice that RSI hit resistance in the 50-60 zone. Broken support in the 38.4-38.6 area turns into first resistance.
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The Gold SPDR (GLD) remains in an uptrend defined by a rising channel this year. After a surge above 161 early last week, the ETF consolidated with a triangle pattern. Friday's surge above 162 broke triangle resistance to signal a continuation of the uptrend. Last week's lows mark first support at 159.6. I will leave key support at 158 for now.
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Key Economic Reports:
Mon - Jan 23 – 08:00 – EU Finance Ministers Meeting
Wed - Jan 25 - 07:00 - MBA Mortgage Index
Wed - Jan 25 - 10:00 - Pending Home Sales
Wed - Jan 25 - 10:00 - FHFA Housing Price Index
Wed - Jan 25 - 10:30 - Crude Inventories
Wed - Jan 25 - 12:30 - FOMC Rate Decision
Thu - Jan 26 - 08:30 - Initial Claims
Thu - Jan 26 - 08:30 - Durable Orders
Thu - Jan 26 - 10:00 - New Home Sales
Thu - Jan 26 - 10:00 - Leading Indicators
Fri - Jan 27 - 08:30 - GDP
Fri - Jan 27 - 09:55 - Michigan Sentiment
Mon - Jan 30 – 08:00 – EU Heads of State Meeting
Mon - Jan 30 – 08:00 – Italian Medium and Long Term Bond Auction
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.
