After big moves on Tuesday, stocks took a breather on Wednesday as the major index ETFs consolidated. The Dow SPDR (DIA) edged higher, while the Nasdaq 100 ETF (QQQ) edged lower. The sectors were also mixed with the biggest moves coming from the Materials SPDR (+88%) and the Finance SPDR (+.67%). XLB extended its oversold bounce and XLF surged to a new high. Despite new highs in several key ETFs and indices, Wednesday was basically an indecisive day. This is hardly surprising because yesterday's trading was sandwiched between Tuesday's big surge and Friday's employment report. On the candlestick charts below, IWM and MDY formed doji near their February highs. Doji signal indecision as buying pressure and selling pressure equalize. Even though the February highs could offer resistance, keep in mind that Tuesday's gap is still holding and this is the dominant short-term chart feature right now. A filling of this gap would be short-term bearish. Elsewhere, the S&P 500 formed an NR7 day (narrowest range in seven days). This also signals indecision that can foreshadow a reversal. Confirmation is, however, mandatory because the short-term uptrend has yet to actually reverse.
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Key Reports and Events (all times Eastern):
Thu - Mar 07 - 08:30 - Initial Claims
Thu - Mar 07 - 08:30 - Continuing Claims
Thu - Mar 07 - 10:30 - Natural Gas Inventories
Thu - Mar 07 - 15:00 - Consumer Credit
Fri - Mar 08 - 08:30 - Nonfarm Payrolls
Fri - Mar 08 - 08:30 - Unemployment Rate
Wed – Mar 27 - 23:59 – Government Shut Down Deadline
Wed – May 15 - 23:59 – 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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