With a better-than-expected jobs report, stocks extended their gains on Friday and Treasuries dropped sharply. The S&P 500 ETF (SPY) hit another new high, while the 20+ Year T-Bond ETF (TLT) closed at its lowest level since May 2012. Stocks are as overbought as Treasuries are oversold, but their respective trends are strong. More importantly, their respective trends feed on each other. The decline in Treasuries means more money is available for stocks and weakness in Treasuries means the bond market is turning more bullish on the economy. The Dollar extended its gains as well and closed near its high for the week. Oil ignored the Dollar last week and actually gained. Perhaps the oil market is turning its focus towards the demand side of the equation as economic expectations improve. Gold also firmed the entire week, but is firming within a downtrend. While the ability to firm above the late February low is potentially positive, we need to see a break above consolidation resistance to show actual buying pressure.
On the economic front, retail sales will be reported on Wednesday. This is an especially important report because the last four monthly reports have been pretty lack-luster (one negative month and three below .5%). There are fears that the payroll tax is a drag on retail sales. Moreover, retail sales drive some 2/3 of GDP, which makes it one of the most important economic reports. The Retail SPDR (XRT) is not concerned at the moment because it soared to a new high on Friday. The two week trend is clearly up and the new high is bullish as long as it holds. A quick move below 68.50 would sew the seeds for a bear trap and break the trend line extending up from the late February low. Medium-term support resides at 65.50 and RSI support at 40.
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Key Reports and Events (all times Eastern):
Wed - Mar 13 - 07:00 - MBA Mortgage Index
Wed - Mar 13 - 08:30 - Retail Sales
Wed - Mar 13 - 10:00 - Business Inventories
Wed - Mar 13 - 10:30 - Crude Inventories
Thu - Mar 14 - 08:30 – Initial Jobless Claims
Thu - Mar 14 - 08:30 – Producer Price Index (PPI)
Thu - Mar 14 - 10:30 - Natural Gas Inventories
Fri - Mar 15 - 08:30 – Consumer Price Index (CPI)
Fri - Mar 15 - 08:30 - Empire State Manufacturing
Fri - Mar 15 - 09:15 - Industrial Production/Capacity Utilization
Fri - Mar 15 - 09:55 - Michigan Sentiment
Fri - Mar 17 – 12:00 – Erin go Bragh!
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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