Asian and European markets are in a risk-on mood after the Greek parliament passed the austerity package. This mood is extending to US stock futures, which are up modestly in pre-market trading. Gold, oil and the Euro are high, while the Dollar and treasuries are lower. For stocks, the uptrends that began on December 19th are simply extending further. Even though the major index ETFs are medium-term overbought and ripe for a corrective period, we have yet to see any significant selling pressure. I remain in the monitoring stage at this point. Stocks and gold are in extended uptrends, while treasuries and the Dollar are in extended downtrend. Oil is a wild card here. The S&P 500 ETF (SPY) opened lower on Friday morning and then firmed the rest of the day. After breaking above its late January high with a gap, the ETF has since consolidated the last six trading days. Broken resistance, the gap and the 19-Dec trendline mark a support zone in the 133-134 area. A break below 133 would be the first sign of weakness, especially if it happens after a strong open. RSI support remains at 40 and would likely be broken on a move below 133. Key support remains at 130 for now.
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The 20+ Year T-Bond ETF (TLT) surged as the markets got nervous ahead of the Greek vote on Friday. The vote as come and gone as expected and TLT is likely to come under selling pressure today. This will reinforce resistance in the 117.5-118 area. The big trend is clearly down with a series of lower lows and lower highs since 19-Dec.
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The US Dollar Fund (UUP) also surged as the markets got cold feet on Friday. UUP broke above its first resistance level, but RSI failed at 60 and there was no follow through to the market surge. I am leaving key resistance at 22.15. A break above this level and RSI break above 60 would reverse the current downtrend.
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Oil remains a tough call. The risk-on trade and stock market strength are bullish for oil, but oil has been trending lower throughout 2012. The US Oil Fund (USO) surged to resistance and failed with a sharp decline on Friday. This reinforces resistance in the 38.50 area. Also note that RSI failed in the 60 area. Clean breaks above these levels would be bullish for oil. USO was knocked back early Friday, but rebounded with a close above 38. This is positive and I would still consider the six day swing up with support at 37.50.
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The Gold SPDR (GLD) moved lower on Friday and broke below its prior low. Even though a lower high and lower low formed the last two weeks, this decline could be a falling flag, which is a bullish consolidation within an uptrend. A break above flag resistance would signal a continuation higher. Failure to hold the bounce off 166 and a break below this level would argue for a deeper correction in gold.
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Key Economic Reports:
Tue - Feb 14 - 08:30 - Retail Sales
Tue - Feb 14 - 10:00 - Business Inventories
Wed - Feb 15 - 07:00 - MBA Mortgage Index
Wed - Feb 15 - 08:30 - Empire State Manufacturing
Wed - Feb 15 - 09:15 - Industrial Production
Wed - Feb 15 - 10:00 - NAHB Housing Market Index
Wed - Feb 15 - 10:30 - Oil Inventories
Wed - Feb 15 - 14:00 - FOMC Minutes
Thu - Feb 16 - 08:30 - Jobless Claims
Thu - Feb 16 - 08:30 - Housing Starts Building Permits
Thu - Feb 16 - 08:30 - Producer Price Index (PPI)
Thu - Feb 16 - 10:00 - Philadelphia Fed
Fri - Feb 17 - 08:30 - Consumer Price Index (CPI)
Fri - Feb 17 - 10:00 - Leading Indicators
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.
