Selling pressure continued on Wednesday as the major index ETFs fell over 1%. The S&P MidCap 400 SPDR (MDY) and Russell 2000 ETF (IWM) led the way with losses approaching 2%. All sectors were down with the Finance SPDR (XLF) and the Industrials SPDR (XLI) leading the way. These two were holding up the best, but both have now broken support and succumbed to selling pressure. As seen with relative weakness in small-caps, mid-caps, financials and homebuilders, yesterday's decline was purely a domestic affair. We cannot blame the Euro because the Dollar actually edged higher.
For the fourth time in four weeks, the S&P 500 ETF (SPY) moved sharply lower. The first drop pushed the ETF below 142, the second below 141, the third below 139 and the current below 136. SPY is down around 7% in four weeks. It is not a crash, but it is certainly a sharp decline with broad selling pressure. SPY broke triangle support around 138 on Tuesday to signal the latest continuation lower. The prior peak around 139 marks the first resistance zone to watch. Key resistance is set in the 141-142 area.
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The 20+ Year T-Bond ETF (TLT) opened lower, but quickly found its footing and surged above 126.5 by the close. The uptrend remains in place with first support now at 125.5. Even though TLT is overbought, a pullback is unlikely as long as stocks, the Euro and oil remain weak. The broken resistance zone turns into a big support zone in the 123-124.5 area.
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The US Dollar Fund (UUP) remains in an uptrend with first support marked in the 22.05 area. The advance slowed over the last few days, but the greenback did not buckle as the risk-off trade held sway. Strength in the Dollar favors the risk-off trade. While a break below 22.05 would be negative, I would not turn too bearish because the Dollar is entitled to a pullback. Broken resistance turns into the next support zone in the 21.95 area.
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The US Oil Fund (USO) held up relatively well on Wednesday. Even though stocks plunged and the Dollar remained firm, USO managed a small flag breakout and modest gain. This breakout is positive as long as it holds. A move below 31.50 would negate the breakout and a move below 31.25 would signal yet another continuation lower. Broken support turns into key resistance in the 33 area.
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The Gold Miners ETF (GDX) and the Silver Miners ETF (SIL) plunged on Wednesday, but the Gold SPDR (GLD) held relatively firm. Relative weakness in GDX is usually negative for gold. We shall see. On the price chart, GLD surged above the October and the early November highs last week and then formed a triangle. A break above 168.1 would signal a continuation higher. I am setting support at 166.5 and a break here would be bearish for gold.
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Key Reports and Events:
Thu - Nov 15 - 08:30 – Jobless Claims
Thu - Nov 15 - 08:30 – Consumer Price Index (CPI)
Thu - Nov 15 - 08:30 - Empire Manufacturing
Thu - Nov 15 - 10:00 - Philadelphia Fed
Thu - Nov 15 - 11:00 - Crude Inventories
Fri - Nov 16 - 09:15 - Industrial Production
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.
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The 20+ Year T-Bond ETF (TLT) opened lower, but quickly found its footing and surged above 126.5 by the close. The uptrend remains in place with first support now at 125.5. Even though TLT is overbought, a pullback is unlikely as long as stocks, the Euro and oil remain weak. The broken resistance zone turns into a big support zone in the 123-124.5 area.
**************************************************************************
The US Dollar Fund (UUP) remains in an uptrend with first support marked in the 22.05 area. The advance slowed over the last few days, but the greenback did not buckle as the risk-off trade held sway. Strength in the Dollar favors the risk-off trade. While a break below 22.05 would be negative, I would not turn too bearish because the Dollar is entitled to a pullback. Broken resistance turns into the next support zone in the 21.95 area.
**************************************************************************
The US Oil Fund (USO) held up relatively well on Wednesday. Even though stocks plunged and the Dollar remained firm, USO managed a small flag breakout and modest gain. This breakout is positive as long as it holds. A move below 31.50 would negate the breakout and a move below 31.25 would signal yet another continuation lower. Broken support turns into key resistance in the 33 area.
**************************************************************************
The Gold Miners ETF (GDX) and the Silver Miners ETF (SIL) plunged on Wednesday, but the Gold SPDR (GLD) held relatively firm. Relative weakness in GDX is usually negative for gold. We shall see. On the price chart, GLD surged above the October and the early November highs last week and then formed a triangle. A break above 168.1 would signal a continuation higher. I am setting support at 166.5 and a break here would be bearish for gold.
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Key Reports and Events:
Thu - Nov 15 - 08:30 – Jobless Claims
Thu - Nov 15 - 08:30 – Consumer Price Index (CPI)
Thu - Nov 15 - 08:30 - Empire Manufacturing
Thu - Nov 15 - 10:00 - Philadelphia Fed
Thu - Nov 15 - 11:00 - Crude Inventories
Fri - Nov 16 - 09:15 - Industrial Production
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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