SPY Stumbles after Flag Break - USO Breaks Support

The chart below shows SPY with a shooting star on Thursday and three days of indecision. Actually, this really amounts to four days of indecision because the ETF has basically stalled in the 146-147 area. A break below 146 would provide the first sign of short-term weakness that could start a correction. There is a small consolidation marking support around 143-144 and major support in the 140 area.



On the 60-minute chart, SPY broke falling flag resistance and edged above 147, but did not hold its gains and closed below 147 on Wednesday. Further weakness below the flag low would clearly negate this breakout and open the door to a support test in the 143-144 area.







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The 20+ Year T-Bond ETF (TLT) is at an interesting juncture. The bounce back to 121 formed a rising wedge and hit the September trend line. The move is enough to alleviate oversold conditions and a break below wedge support would signal a continuation higher. A breakdown in TLT would be positive for stocks, but weakness in stocks could push money into treasuries and produce a breakout at 121.5 for TLT.



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After becoming oversold last week, the Dollar firmed this week as the US Dollar Fund (UUP) found some support in the 21.7 area. I am marking minor resistance at 21.76 and a break above this level would be short-term positive. The August trend line and last week's high mark key resistance in the 22-22.1 area. RSI resistance remains at 60.



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The US Oil Fund (USO) completely broke down as the second shoe dropped on Wednesday. After falling sharply Monday afternoon, USO consolidated on Tuesday and broke support at 35 on Wednesday. This clearly reverses the uptrend that was in place since late June. Moreover, the June-Sept advance retraced 61.80% of the March-June decline. In other words, a bigger reversal could be in the making here. The broken trend line and Tuesday's high mark resistance at 36 for now.



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The Gold SPDR (GLD) is likely to be at the mercy of the Dollar and stock market. An oversold bounce in the Dollar and pullback in stocks would be negative for bullion. GLD is overbought after three surges carried it some 11% since mid August. First support remains at 167 and key support at 159. 



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Key Reports and Events:   
                                                   
Thu - Sep 20 - 08:30 - Jobless Claims            
Thu - Sep 20 - 10:00 - Philadelphia Fed    
Thu - Sep 20 - 10:00 - Leading Indicators
Thu - Sep 20 - 16:15 – Oracle Earnings
Fri - Sep 21 – 08:30 – Darden Restaurants and KB Home Earnings
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.