Trading volume is low, the last two dog days of summer are here, we are heading into a three day weekend and Fed Chairman Bernanke is speaking from Jackson Hole at 10AM tomorrow. The first three items argue for another listless session. The fourth item, Chairman Bernanke, is clearly the wild card that could trigger a sizable move. I do not know what he is going to say, but you can be sure he will weigh every word very carefully. Nothing has really changed since the last Fed statement so we can use that as a guideline. The chart below shows the S&P 500 ETF (SPY) moving above 140 in early August and then consolidating. This is the equivalent of the 1400 area for the S&P 500. At what point should chartists become concerned that the uptrend is reversing? Chartist might consider the 139 level in early September (1390 SPX). A move below this level would break consolidation support and the June trend line. The indicator window shows the 23 day rate-of-change, which covers one month. Traders are happy to be long as long as this is positive. A move into negative territory would be, well, negative for the market.
Once again, there are no major changes for SPY, QQQ and IWM. All three broke wedge resistance and these breakouts are holding. SPY and QQQ stalled after the breakout, but IWM continued higher and small-caps are showing some relative strength the last five days. SPY and QQQ have small triangles working this week. While a move below triangle support would be negative, this support level is quite tight and there is another support just below.
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No change. Treasuries are going to have to give up their rally if stocks are to continue theirs. After becoming oversold near 121, the 20+ Year T-Bond ETF (TLT) surged above channel resistance and this breakout is holding. I am marking resistance in the 126.50 area. First support is set at 124.5 and a break below this level would suggest a move towards the risk-on trade.
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The US Dollar Fund (UUP) is firming, but remains short of even a minor breakout. First resistance is set at 22.47 and key resistance at 22.60. Broken support and the late July trend line mark key resistance. RSI resistance is set at 60 and a break above this level is needed to turn momentum bullish. The US Dollar Index ($USD) is trading in a support zone (81-81.5) on the daily chart and a break above 82 would suggest a successful test.
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The US Oil Fund (USO) broke above flag resistance, but did not get much help from the stock market or the Dollar. An upside surprise on inventories pushed prices lower on Wednesday. The flag breakout failed, but there is still support in the 35-35.25 area and RSI is trading in a support zone. A break below 35 in USO and 40 in RSI would be short-term bearish.
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No change. The Gold SPDR (GLD) broke resistance with a big move on Tuesday and surged above 162. GLD is short-term overbought after a 4.5% surge in less than two weeks. Also note that weakness in the Dollar helped gold and a bounce in the Dollar could hurt. Broken resistance turns into the first support zone in the 156-158 area. Key support remains at 153.50.
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Key Reports and Events:
Thu - Aug 30 - 08:30 - Jobless Claims
Thu - Aug 30 - 08:30 - Personal Income & Spending
Fri - Aug 31 - 09:45 - Chicago Purchasing Managers Index (PMI)
Fri - Aug 31 - 09:55 - Michigan Sentiment
Fri - Aug 31 - 10:00 - Factory Orders
Fri – Aug 31 – 10:00 – Bernanke Speaks from Jackson Hole
Thu – Sep 06 – 14:30 – European Central Bank (ECB) Meeting
Tue – Sep 11 – 09:00 – Troika to Greece
Wed – Sep 12 – 09:00 – German Constitutional Court Ruling
Wed – Sep 12 – 14:15 – FOMC Policy Statement
Sat – Oct 06 – 09:00 – EU Summit
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.
