IWM and MDY Breakout as Small and Mid Caps Perk Up

Mid-caps also got in on the leadership action with the S&P MidCap 400 SPDR (MDY) gaining over 1%. MDY also broke above triangle resistance and exceeded its mid July high. A little relative weakness in mid-caps is also positive for the market. The indicator windows show the price relatives for IWM and MDY. These two have shown relative weakness for several months, but relative weakness for a few days.



There is no change on the 60-minute chart for the S&P 500 ETF (SPY). The trend remains up since mid June with each low punctuated by a gap higher. Actually, the most recent gap occurred above the lower trend line of the rising channel as buying pressure stepped in earlier. With this week's move above 140, SPY exceeded the upper trend line of the rising channel and became a bit overbought. This does not weaken the trend, but it does increase the chances for a consolidation or pullback.







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Treasuries got hammered again as money moves into riskier assets. Money moving out of these relative safe-havens is finding its way into stocks. The 20+ Year T-Bond ETF (TLT) broke rising channel support and fell below the broken resistance zone on Tuesday. TLT is getting short-term oversold, but shows no signs of strength, just as stocks show no signs of weakness. Next support resides around 124 from the June lows.



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The Dollar managed to firm on Tuesday and a falling wedge could be taking shape. Focus turned back to Europe as S&P downgraded Greece. While the rating agencies do not have much "street cred", the downgrade did renew attention on the Greek economy and Greek debt. The US Dollar Fund (UUP) is still above its June lows and needs to reverse near current levels to keep the string of rising troughs in place.



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Strength in stocks is bullish for oil and the US Oil Fund (USO) added to its gains this week. The ETF broke resistance with a big surge early Friday and continued higher. The trend since late June is up as oil contributes to the risk on trade. I am marking key support at 32.50 and RSI support at 40.


 
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Gold is lagging the stock market over the last two days as the Gold SPDR (GLD) pulled back with a falling flag. These are bullish continuation patterns, but relative weakness is a concern. A break above Tuesday's high would signal a continuation of the prior surge. A lot may depend on the Dollar. A bounce in the Dollar could hit gold, which is negatively correlated to the greenback.  



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Key Reports and Events:   
                               
Wed - Aug 08 - 07:00 - MBA Mortgage Index            
Wed - Aug 08 - 10:30 - Oil Inventories    
Thu - Aug 09 - 08:30 - Jobless Claims                
Thu - Aug 09 - 10:00 - Wholesale Inventories    
Fri – Aug 31 – 09:00 – Jackson Hole Central Bank Symposium
   
Charts of Interest: Tuesday and Thursday

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.