Stocks have traded in mixed fashion for several weeks now. DIA, SPY and RSP are flat since early March, but QQQ and IWM are down. Relative weakness in small-caps and large-techs is a concern, but we have yet to see a breakdown in the broader market. Relative weakness in the Consumer Discretionary SPDR (XLY) and relative strength in the 20+ YR T-Bond ETF (TLT) are also concerns for the stock market. Note that the 20+ YR T-Bond ETF (TLT) has outperformed SPY over the last two months. SPY, QQQ and IWM are holding their short-term upswings for now, but QQQ and IWM are near resistance from key retracements and prior highs. QQQ and IWM could be at short-term inflection points so chartists need to watch short-term support levels closely.
**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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SPY has traded within an expanding range since late February. After a relatively tame range in March, trading turned volatile in April as the ETF surged to 189.3, plunged to 181.3 and then surged above 188. Short-term, it looks like traders need to play the swings until there is a definitive break to the upside or downside. The current swing is up with support marked in the 186-187 area.
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What would QQQ have done without Apple on Thursday? Answer: not very much. QQQ surged to the 87.5 area early this week and hit resistance near the 9-Apr high and 62% retracement. Overall, I would suggest that the trend since early March is down with a series of lower highs. Like SPY, however, it looks like traders need to play the shorter swings. QQQ established support with the Wed-Thur lows and a break below 86.5 would reverse the upswing.
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IWM looks a lot like QQQ. The trend since early March is down, but the swing since last week is up. The ETF hit resistance from the 9-April high and 62% retracement, and pulled back over the last two days. A move below the support zone at 112-113 would reverse the upswing.
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No change. The 20+ YR T-Bond ETF (TLT) got a pretty good bounce on Tue-Wed and moved back above broken support, which turned first resistance in the 110.3-110.6 area. The bounce in Treasuries is potentially negative for stocks. I will leave key support at the channel trend line and mid April lows (108.5).
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No change. The US Dollar ETF (UUP) surged above 21.55 in early April, but failed to hold these gains and fell back to the mid March lows on 10-April. The Euro Index ($XEU) holds the key to the Dollar. XEU fell to 138 last week and then consolidated. A break below 137.9 would be Euro negative and Dollar positive. Watch out though. The Euro is one resilient currency and a break above 139 would be bullish.
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No change: The USO Oil Fund (USO) formed a triangle in early April and broke triangle resistance with a surge the second week of April. After stalling in the 37.5-37.75 area last week, the ETF fell sharply on Tuesday and is nearing its first support zone. Broken resistance and the trend line zone extending up from mid March mark support in the 36.5-36.8 area.
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No change: Gold continues to follow the Euro. Or maybe the Euro is following gold. Either way, these two are positively correlated. Notice how both rose into mid March, fell in the second half of March, bounced in early April and then fell over the last seven days. GLD hit resistance at broken support and the 50% retracement. The channel support break reversed the April upswing and gold is short-term bearish right now.
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Key Reports and Events (all times Eastern):
Fri - Apr 25 - 09:55 - Michigan Sentiment
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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