Stocks started the week in strong uptrends and short-term overbought conditions after big gains the prior three weeks. This did not deter buyers as the S&P 500 ETF (SPY) and the Russell 2000 ETF (IWM) broke consolidation resistance levels mid week. The Nasdaq 100 ETF (QQQ) was hit with weakness in Google, Intel and Microsoft. Despite a sell off in large-cap tech stocks at the end of the week, the short-term uptrends remain in place for SPY and IWM. Weak earning reports weighed on techs, but strength in bank earnings lifted the finance sector. As the PerfChart below shows, the Technology SPDR (XLK) and Basic Materials SPDR (XLB) are seriously underperforming SPY. These are by far the two weakest sectors in the market. In contrast, the Consumer Discretionary SPDR (XLY) and the Finance SPDR (XLF) are by far the strongest. These two are leading the market with new highs on their respective price charts. Despite relative weakness in big tech stocks, it is hard to argue with relative strength and upside leadership from the consumer discretionary and finance sectors. It is a HUGE week for earnings with over 800 companies reporting. McDonalds and Texas Instruments kick it off on Monday. Apple, Lockheed Martin and UPS are on deck for Tuesday. Caterpillar, EMC, Facebook and Qualcom report on Wednesday. 3M, Amazon and Starbucks feature on Thursday. KKR, Tyco and Choice Hotels finish it off on Friday.
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Key Reports and Events (all times Eastern):
Mon - Jul 22 - 10:00 - Existing Home Sales
Tue - Jul 23 - 09:00 - FHFA Housing Price Index
Wed - Jul 24 - 07:00 - MBA Mortgage Index
Wed - Jul 24 - 10:00 - New Home Sales
Wed - Jul 24 - 10:30 - Crude Inventories
Thu - Jul 25 - 08:30 - Continuing Claims
Thu - Jul 25 - 08:30 - Durable Orders
Thu - Jul 25 - 10:30 - Natural Gas Inventories
Fri - Jul 26 - 09:55 - Michigan Sentiment - Final
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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