Stocks took it on the chin with broad-based selling pressure on Tuesday. The Nasdaq 100 ETF (QQQ) and Russell 2000 ETF (IWM) led the way and broke short-term support levels. This means IWM and QQQ have joined SPY and DIA with downtrends. The Home Construction iShares (ITB) led the consumer discretionary sector lower with a 2.31% decline and the Retail SPDR (XRT) fell almost 2%. Relative weakness in these two key groups is a big negative for the market. Techs were also quite weak with the FirstTrust Internet ETF (FDN) falling 3.5%, the Semiconductor SPDR (XSD) losing 2.06% and the Networking iShares (IGN) declining 2.15%. The chart below shows the S&P 500 AD Line ($SUPADP) breaking down at the end of August and extending its short-term downtrends with heavy selling pressure this week. In fact, notice that the last two positive spikes failed to exceed +75% and the last two negative spikes did exceed -75%. Selling pressure is clearly in control in October.
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
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Key Reports and Events (all times Eastern):
No government reports during the shutdown
Wed - Oct 09 - 07:00 - MBA Mortgage Index
Wed - Oct 09 - 10:30 - Crude Oil Inventories
Wed - Oct 09 - 14:00 - FOMC Minutes
Thu - Oct 10 - 08:30 - Initial Jobless Claims
Thu - Oct 10 - 10:30 - Natural Gas Inventories
Fri - Oct 11 - 08:30 - Retail Sales
Fri - Oct 11 - 08:30 - Producer Price Index (PPI)
Fri - Oct 11 - 09:55 - Michigan Sentiment
Fri - Oct 11 - 10:00 - Business Inventories
Thu - Oct 17 - 23:59 - Debt Ceiling Deadline
Thu - Oct 24 - 09:00 - Government Runs out of Money (estimate)
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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