The major index ETFs followed through on the Friday afternoon rebound and closed modestly higher on Monday. The Russell 2000 ETF (IWM) led the way, but this small-cap ETF was also hit the hardest last week. Technically, the S&P 500 ETF (SPY) remains the strongest of the big three (QQQ, SPY, IWM). IWM and QQQ broke support with sharp declines last week, but SPY held support from the mid March lows. Even with Monday's rebound, IWM remains below the support break, although QQQ did recapture this break. Overall, the stock market is quite mixed up right now. The big miss on the employment report sewed some serious uncertainty as we head into third quarter earnings. Even though analyst expectations have been reduced, the S&P 500 is still near a 52-week high and near its 2007 high. In fact, the index is up rather sharply in the lead-up to third quarter earnings. It is one thing to have low expectations and be priced for such expectations. It is quite another to have low expectations and be priced for good news. If we combine this with the bearish six month cycle and overbought conditions, the market as a whole looks rather vulnerable to a correction or consolidation.
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Key Reports and Events (all times Eastern):
Tue - Apr 09 - 10:00 - Wholesale Inventories
Wed - Apr 10 - 07:00 - MBA Mortgage Index
Wed - Apr 10 - 10:30 - Oil Inventories
Wed - Apr 10 - 14:00 - FOMC Minutes
Thu - Apr 11 - 08:30 - Jobless Claims
Thu - Apr 11 - 10:30 - Natural Gas Inventories
Fri - Apr 12 - 08:30 - Retail Sales
Fri - Apr 12 - 08:30 - Producer Price Index (PPI)
Fri - Apr 12 - 09:55 - Michigan Sentiment
Fri - Apr 12 - 10:00 - Business Inventories
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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