Stocks extended their upswing as the major index ETFs broke channel resistance. Small-caps led this week's advanced as the IWM:SPY ratio moved to its highest level of the month. Relative strength in small caps suggests a good appetite for risk at the moment. There is a lot of talk that the market is totally focused on today's Fed meeting. Is the market that short-term oriented? Perhaps the market is focused on the next Fed chairman. Perhaps the market is pricing in an even more dovish Fed chairperson, such as front-runner Janet Yellen. Turning back to stocks, several of the major index ETFs and the sector SPDRs forged flag breakouts over the last two days. Playing a breakout on a Fed day is a challenge because we can still expect volatility as the market dissects every word of the Fed statement (2:00 PM) and then hangs on every word of the news conference (2:30 PM). Overall, stocks are in medium-term uptrends and the recent flag breakouts reversed the short-term downtrends. These breakouts are bullish until proven otherwise. A strong breakout should hold and traders should watch these breakout zones for the first signs of weakness.
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Key Reports and Events (all times Eastern):
Wed - Jun 19 - 07:00 - MBA Mortgage Index
Wed - Jun 19 - 10:30 - Oil Inventories
Wed - Jun 19 - 14:00 - FOMC Policy Statement
Thu - Jun 20 - 08:30 - Jobless Claims
Thu - Jun 20 - 10:00 - Existing Home Sales
Thu - Jun 20 - 10:00 - Philadelphia Fed
Thu - Jun 20 - 10:00 - Leading Economic Indicators
Thu - Jun 20 - 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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