Stocks were all over the place on Wednesday. The major index ETFs opened strong, pulled back in the late morning, surged after the Fed announcement and pulled back again in the final hour. The end result was mixed as the S&P 500 ETF (SPY) and Nasdaq 100 Equal-Weight ETF (QQEW) edged higher, while the Russell 2000 ETF (IWM) and Nasdaq 100 ETF (QQQ) edged lower. The sectors were also mixed with the Finance SPDR (XLF) and Energy SPDR (XLE) edging higher, while the Technology SPDR (XLK) and Basic Materials SPDR (XLB) edged lower. There is not much to write home about here. The chart below shows XLB hitting resistance from the last two bearish engulfing patterns. The trend since mid November is up with first support marked at 35.75. The MACD-Histogram remains positive and a move into negative territory would be bearish for short-term momentum.
Wednesday's big news was, of course, the Fed policy statement and policy change. For the first time in a long time, the Fed actually surprised the markets by tying interest rate changes to the unemployment rate. The Fed will not raise rates until the rate moves below 6.5%. The Fed also announced a new round of quantitative easing that will begin with a $45 billion Treasury bond purchase in January. This was not good news for the Dollar or Treasury bonds, both of which fell. A decline in treasury bonds and the Dollar is normally bullish for stocks, but stocks reacted mixed because the fiscal cliff still looms and a deal is already priced into the market. This means no-deal would be no-bueno. Gold and oil are pretty much ignoring the Dollar and stock market by remain in the doldrums.
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Key Reports and Events:
Wed - Dec 12 - 07:00 - MBA Mortgage Index
Wed - Dec 12 - 10:30 - Oil Inventories
Wed - Dec 12 - 12:30 - FOMC Rate Decision
Thu - Dec 13 - 08:30 - Jobless Claims
Thu - Dec 13 - 08:30 - Retail Sales
Thu - Dec 13 - 08:30 – Producer Price Index (PPI)
Fri - Dec 14 - 08:30 – Consumer Price Index (CPI)
Fri - Dec 14 - 09:15 - Industrial Production/Capacity Utilization
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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Key Reports and Events:
Wed - Dec 12 - 07:00 - MBA Mortgage Index
Wed - Dec 12 - 10:30 - Oil Inventories
Wed - Dec 12 - 12:30 - FOMC Rate Decision
Thu - Dec 13 - 08:30 - Jobless Claims
Thu - Dec 13 - 08:30 - Retail Sales
Thu - Dec 13 - 08:30 – Producer Price Index (PPI)
Fri - Dec 14 - 08:30 – Consumer Price Index (CPI)
Fri - Dec 14 - 09:15 - Industrial Production/Capacity Utilization
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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