Stocks caught a bid on Thursday as the major index ETFs advanced over 1% on the day. A better-than-expected retail sales report put stocks on a positive footing from the start and they extended their advance throughout the day. There is also talk that the Fed will start jawboning down the expectations for an end to quantitative easing. Apparently, the Fed is not happy with implications of the word "tapering". Whatever. In any case, the advance was quite broad with all sectors moving higher. In particular, consumer discretionary stocks were strong as the Home Construction iShares (ITB) surged over 4% and the Retail SPDR (XRT) was up 1.64% on the day. Rate sensitive stocks also got a boost as the Utilities SPDR (XLU) bounced 1.46% and the Real Estate iShares (IYR) surged 3.05%. Even though Thursday's advance was pretty strong, the major index ETFs remain in short-term downtrends and have yet to break short-term resistance levels. In other words, follow through is needed to actually reverse the short-term downtrends, which look like flags and wedges on the daily charts. The charts below show resistance levels for the S&P 500 AD Line and AD Volume Line.
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Key Reports and Events (all times Eastern):
Fri - Jun 14 - 08:30 - Producer Price Index (PPI)
Fri - Jun 14 - 09:15 - Industrial Production
Fri - Jun 14 - 09:55 - Michigan Sentiment
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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