It was a short, but wild, week for stocks. The major index ETFs started strong on Tuesday, plunged on Wednesday-Thursday and then rebounded on Friday. The Nasdaq 100 ETF (QQQ) hit a new low for 2013 during Thursday's dip, while the Russell 2000 ETF (IWM) and S&P 500 ETF (SPY) pierced the lower trend lines of their rising channels. And now for the $64,000 question? Did the short-term uptrend really reverse? If so, then the current bounce would be an oversold bounce and resistance would be expected sooner rather than later. If the short-term uptrend did not really reverse, then Thursday's decline was an overshoot ad a move to new highs would be expected. Decisions, decisions. The medium-term trend is clearly up and carries more weight than the short-term trend. This means the medium-term trend can pull trump at any time. Selling pressure on Wednesday-Thursday was, however quite intense as volume swelled and negative breadth plunged to depths not seen since November. Also note that positive breadth and volume on Friday's rebound were not as strong. At this point, I will treat last week's support breaks as short-term bearish and consider Friday's bounce as an oversold bounce. Also note that the Consumer Staples SPDR (XLP) and Utilities SPDR (XLU) closed at new highs for the move and the market appears to be taking on a more defensive orientation. Note that Europe will take center stage later today because the Italian polls close at 3PM CET (9AM ET).
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Key Reports and Events (all times Eastern):
Mon - Feb 25 - 09:00 – Italian Polls Close
Tue - Feb 26 - 09:00 - Case-Shiller 20-city Index
Tue - Feb 26 - 09:00 - FHFA Housing Price Index
Tue - Feb 26 - 10:00 - New Home Sales
Tue - Feb 26 - 10:00 - Consumer Confidence
Wed - Feb 27 - 07:00 - MBA Mortgage Index
Wed - Feb 27 - 08:30 - Durable Goods Orders
Wed - Feb 27 - 10:00 - Pending Home Sales
Wed - Feb 27 - 10:30 - Oil Inventories
Thu - Feb 28 - 08:30 - Jobless Claims
Thu - Feb 28 - 08:30 - GDP
Thu - Feb 28 - 09:45 - Chicago PMI
Thu - Feb 28 - 10:30 - Natural Gas Inventories
Fri - Mar 01 - 08:30 - Personal Income & Spending
Fri - Mar 01 - 09:55 - Michigan Sentiment
Fri - Mar 01 - 10:00 - ISM Index
Fri - Mar 01 - 10:00 - Construction Spending
Fri - Mar 01 - 14:00 - Auto Sales/Truck Sales
Fri – Mar 01 - 23:59 – Sequester Takes Effect (unless...)
Wed – Mar 27 - 23:59 – Government Shut Down Deadline
Wed – May 15 - 23:59 – New Debt Ceiling Deadline
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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