After a big decline two weeks ago, stocks moved into a choppy consolidation last week. SPY produced three gaps two weeks ago and another three gaps last week. SPY gapped down from resistance on 23-Jan and gapped down again on 24-Jan en route to a sharp two-day decline. This decline pretty much set the tone for January. Trading turned erratic last week as SPY gapped down on Wednesday, up on Thursday and back down on Friday. Even though stocks rebounded after early weakness on Friday, the net result is negative because SPY is simply consolidating within a short-term downtrend. Also note that Treasuries continue to outperform stocks as the 20+ YR T-Bond ETF (TLT) gained .74% and the 10-YR Treasury Yield ($TNX) fell to 2.668%, its lowest level since mid November. Stocks are unlikely to mount an advance as long as money moves into Treasuries, and it will be a big week for the bond market because the economic docket is full. We have ISM Manufacturing and Auto/Truck sales on Monday. ISM Services and the ADP Employment report hit on Wednesday. The employment report caps off the week on Friday. Keep in mind that last month's employment report fell well short of expectations. Another miss would likely keep the bid in Treasuries and this could weigh further on stocks.
**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):
Mon - Feb 03 - 10:00 - ISM Manufacturing Index
Mon - Feb 03 - 10:00 - Construction Spending
Mon - Feb 03 - 14:00 - Auto Sales/Truck Sales
Tue - Feb 04 - 10:00 - Factory Orders
Wed - Feb 05 - 07:00 - MBA Mortgage Index
Wed - Feb 05 - 08:15 - ADP Employment Report
Wed - Feb 05 - 10:00 - ISM Services Index
Wed - Feb 05 - 10:30 - Crude Inventories
Thu - Feb 06 - 07:30 - Challenger Job Report
Thu - Feb 06 - 08:30 - Initial Jobless Claims
Thu - Feb 06 - 10:30 - Natural Gas Inventories
Fri - Feb 07 - 08:30 - Employment Report
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.
