Stocks surged on the open and then moved into a relatively tight trading range. It is positive that the gains held, but lack of follow through suggests that the bulls are getting a little fatigued. The Nasdaq 100 Equal-Weight ETF (QQEW) and the S&P MidCap 400 SPDR (MDY) led the way on Wednesday with gains near 1%. All sectors were up with the Consumer Discretionary SPDR (XLY) and the Consumer Staples SPDR (XLP) leading the way. That is certainly a strange leadership pair. Also note that the Utilities SPDR (XLU) hit a fresh 52-week high and the Healthcare SPDR (XLV) is within a few cents of its 52-week high. Yes, the defensive sectors are strong and showing leadership. The offensive sectors, however, are not exactly weak. XLI, XLF, XLK and XLY are all near their 2013 highs. Despite strength overall, there is some concern because of recent misses from FedEx (FDX), Caterpillar (CAT) and Oracle (ORCL). Also note that copper remains in a downtrend and oil failed at resistance this week. Another big question revolves around relative weakness in the Metals & Mining SPDR (XME) and other materials-related ETFs (SLX,SLV,GDX,COPX). XME surged in early March and then consolidated with a falling flag. A break above 41.7 would signal a continuation higher. Barring a breakout, the bigger downtrend rules the roost here. The Silver Trust (SLV) plunged in February and then moved into a tight range the last four weeks. The bigger trend is down, but the ETF could go either way from this consolidation. Watch 28.5 up and 27.4 down.
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Key Reports and Events (all times Eastern):
Thu - Mar 21 - 08:30 - Jobless Claims
Thu - Mar 21 - 10:00 - Existing Home Sales
Thu - Mar 21 - 10:00 - Philadelphia Fed
Thu - Mar 21 - 10:00 - Leading Indicators
Thu - Mar 21 - 10:30 - Natural Gas Inventories
Wed – Mar 27 - 23:59 – US Government Shut Down Deadline
Wed – May 15 - 23:59 – US 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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