Let the volatility begin! Stocks plunged on Monday, rebounded on Tuesday and are trading lower before the open on Wednesday. Yahoo! traded sharply lower after hours because it missed estimates on ad revenues. Intel was mixed after reporting weak first quarter earnings. The company reduced capex estimates, which means the company is investing less in the equipment needed for production. Intel is still tied to the PC in a big way and this could weigh on earnings the rest of the year. Even though technical analysis drives my thinking, I am concerned with first quarter earnings because the S&P 500 and Dow Industrials are still within 2% of their all time highs. In other words, stocks are still priced for perfection and first quarter earnings have been far from perfect thus far. Turning back to the rebound, the major index ETFs recouped around half of Monday's losses. Should Monday's decline herald the start of an extended correction, this is a good spot for the bounce to end and the decline to resume. The chart below shows SPY with support in the 153-154 area. Support here stems from the Raff Regression Channel and recent lows. This is the most obvious downside target.
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Key Reports and Events (all times Eastern):
Tue - Apr 16 - 08:30 – Consumer Price Index (CPI)
Tue - Apr 16 - 08:30 - Housing Starts/Building Permits
Tue - Apr 16 - 09:15 - Industrial Production
Wed - Apr 17 - 07:00 - MBA Mortgage Index
Wed - Apr 17 - 10:30 - Oil Inventories
Wed - Apr 17 - 14:00 - Fed Beige Book
Thu - Apr 18 - 08:30 - Jobless Claims
Thu - Apr 18 - 10:00 - Philadelphia Fed Report
Thu - Apr 18 - 10:00 - Leading Indicators
Thu - Apr 18 - 10:30 - Natural Gas 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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