Stocks meandered around in positive territory on Monday and ended the day with small gains. A little indecision is understandable given the recent gains and the news flow over the next few days. Key happenings include the German constiutional court ruling and the Apple event today, the FOMC policy statement on Thursday and retail sales on Friday. Once again, the Nasdaq 100 ETF (QQQ) edged lower as we head into the mobile phone event of the century. Yes, Apple has some product called the iphone and they are expected to announce a new model. Keep in mind that this is the most valuable company on the stock market and the iphone generated some $150 billion in revenue since its 2007 launch. We could have a little buy-the-rumor and sell-the-news working for Apple. As the chart shows, the stock surged in August with a 19% advance from its late July low. Even though the broader market held firm the last two days, Apple fell 2.92%. The long-term trend for Apple is nothing but up, but the stock is a bit overbought and ripe for a correction or consolidation. Broken resistance, the May trend line and the 38.2% retracement mark a support zone in the 610-620 area. Keep in mind Apple accounts for 20% of QQQ.
On the 60-minute chart, the S&P 500 ETF (SPY) broke wedge resistance with a gap-surge and this breakout is holding as the ETF consolidates in the 144 area. Even though there is a clear five wave count on the chart, I would put more weight on the uptrend and breakout. A move above the two-day high would break consolidation resistance and signal another continuation higher. Broken resistance turns into first support in the 142 area. Key support remains at 139.8 and RSI support at 40.
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No change. This is where it gets tricky for treasuries. The news flow will be heavy from Wednesday to Friday with a Fed policy statement on Thursday. The 20+ Year T-Bond ETF (TLT) broke support last week as the stock market surged on Thursday. This decline retraced 50-61.80% of the late August advance and this area marks a make-or-break zone. I am setting first resistance at 125.5 for TLT and first support at 16 (1.6%) for the 10-year Treasury Yield ($TNX). A break of these two levels would be short-term bullish for treasuries and bearish for stocks.
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No change. The Dollar got squashed again on Friday as the US Dollar Fund (UUP) plunged below 22.10 and stayed down. The short-term downtrend extended and there is not much change on the chart, other than some severe oversold conditions. The late August consolidation marks the first resistance zone around 22.3-22.50. RSI resistance is set in the 50-60 zone.
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No change. Oil is all mixed up with no place to go. Even though the Dollar fell sharply and stocks surged, the US Oil Fund (USO) is still bouncing around support in the 35 area. USO should be much higher considering the help it has had from the greenback and stock market. Despite dragging its feet, USO is holding support at 35 and RSI is holding support at 40. A break in both would be short-term bearish.
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No change. Gold is certainly taking advantage of a weak Dollar and the prospects of more quantitative easing. The Gold SPDR (GLD) broke out in mid August, continued higher in late August and surged above 168 at the end of last week. GLD is as overbought as the Dollar is oversold, but shows no signs of weakness. First support is set in the 161-162 area. Key support remains in the 156-158 area.
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Key Reports and Events:
Wed – Sep 12 – 09:00 – Troika in Greece
Wed - Sep 12 - 07:00 - MBA Mortgage Index
Wed – Sep 12 – 09:00 – German Ruling on European Stability Mechanism (ESM)
Wed – Sep 12 – 09:00 – EU Commission Banking Union Proposal
Wed – Sep 12 – 09:00 – Dutch Elections
Wed - Sep 12 - 10:30 - Oil Inventories
Wed – Sep 12 – 14:15 – FOMC meeting begins
Wed – Sep 12 – 09:00 – Apple Event for iPhone 5, iPad mini, iCar, iWife....
Thu - Sep 13 - 08:30 - Jobless Claims
Thu - Sep 13 - 08:30 – Producer Price Index (PPI)
Thu - Sep 13 - 12:30 – FOMC Policy Statement
Fri - Sep 14 - 08:30 - Retail Sales
Fri - Sep 14 - 08:30 – Consumer Price Index (CPI)
Fri - Sep 14 - 09:15 - Industrial Production
Fri - Sep 14 - 09:55 - Michigan Sentiment
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.
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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