Trading has sure been choppy the last four weeks, and it could get even choppier as the Fed meets this week. Ugh. The talk of Fed tapering began 4-5 weeks ago and this triggered an adjustment in the markets. The PerfChart below shows the S&P 500, the 10-year Treasury Yield ($TNX), some currencies and two emerging market indicators. The S&P 500 (red) is down as yields surged (blue). The Dollar (light blue) is down as the Euro (green) and Yen (pink) surged. The Nikkei 225 ($NIKK) is all over the place with a ±80 percent advance followed by a ±20% decline from its high. Emerging market stocks (teal) and emerging market debt (purple) were hit hard. Fed Chairman Bernanke must be thinking to himself: Was it something I said? The Wall Street Journal and other sources are now full of stories that the Fed will now "back off" its tapering stance or tapering talk. More so than ever, every Fed word will be carefully weighed to try and decipher this more "open" Fed. It is still hard to predict what the Fed will say and how the market will react. My best guess is that stocks and commodities would surge at any hint that the Fed is backing off of its tapering talk. The major index ETFs remain in falling flag patterns on the daily charts. Treasuries firmed last week, but remain in short-term downtrends. Oil is making noise with a breakout and gold is consolidating.
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Key Reports and Events (all times Eastern):
Mon - Jun 17 - 08:30 – Empire State Manufacturing
Mon - Jun 17 - 10:00 - NAHB Housing Market Index
Tue - Jun 18 - 08:30 – Consumer Price Index (CPI)
Tue - Jun 18 - 08:30 - Housing Starts/Building Permits
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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