Stocks were mixed on Monday, but the major index ETFs managed to eek out small gains. Small-caps showed some relative strength as the Russell 2000 ETF gained .48% on the day. The sectors were mixed with weakness in finance, industrials and materials. Energy and utilities were strong. Strength in oil is helping the Energy SPDR and a slight decline in the 10-YR Treasury Yield helped the Utilities SPDR. The Finance SPDR (XLF) surged to a new high in early June and then fell back over the last five days. This decline could be a steep falling flag and a move above 22.7 would reverse the five-day downtrend. Barring a breakout, XLF could correct back to broken resistance in the 22.2 area. Financials will key off of two things: Treasury yields and Justice Department settlements. It is a big week for Treasuries because the FOMC will make its policy statement on Wednesday. An upside breakout in the 10-YR Treasury Yield ($TNX) would be quite positive for banks because it would increase their lending margins. Bank of America and Citigroup are negotiating with the Justice Department and have yet to reach a settlement, which creates uncertainty. This uncertainty will be lifted once the settlement is announced.
**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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No change. SPY remains in an uptrend since the April surge above 187. After a 5.2% advance to 196, SPY corrected with a decline to the 193-194 area, which is just above the first support zone. I am marking first support in the 192-193 area (38% retracement and early June consolidation. Further down, broken resistance and the 61% retracement mark support in the 190 area. If I had to make a guess, I would guess that this correction will zigzag lower and we could see a reversal in the 191 area (between the two support zones).
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No change. QQQ surged over 7% with the move to 93 and then fell back to 92 last week. This is not much of a correction or pullback. QQQ remains the strongest of the big three (IWM, SPY, QQQ) because it has the shallowest pullback. The pennant lows and 38% retracement combine to mark first support in the 91 area. I will leave key support in the 88-88.5 area for now.
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IWM broke flag resistance on Friday and this breakout held with further gains on Monday. It is bullish until proven otherwise. A move below 115 would negate the little breakout and call for a deeper correction towards the next support zone in the 113-114 area. I drew Fibonacci retracements from the mid May low to the mid June high and from the early June low to the mid June high. A cluster formed in the 113-114 area and there is support from broken resistance here.
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No change. TLT broke down with a move to 111 in early June and then moved into a rather choppy range. At this point, I think we need to establish a directional bias: up or down. I have a downward bias on TLT because of the channel break and lower low in early June. This means the choppy range is a correction within a bigger downtrend. This thesis would be seriously tested with a break above 112.7. A break below the consolidation lows would signal a continuation lower.
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No change. The US Dollar ETF (UUP) got another bounce as the Euro Index ($XEU) sank below 135.5 last week. UUP held its breakout as broken resistance turned support in the 21.45 area. This is the first support zone to watch for a break down. I am lowering key resistance for the Euro to 137. In the lower indicator window, the Yen Index ($XJY) bounced above 98 and is on the verge of breaking a four week trend line. Strength in the Yen would be negative for the Nikkei 225 ($NIKK).
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No change. USO continued higher with a surge above 39 and Spot Light Crude ($WTIC) broke above a key resistance zone on the daily chart. Broken resistance in the 38.25 area turns first support for USO. I will leave key support in the 37.25-37.5 area for now.
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No change. Gold got a big bounce last week as worries on Iraq pushed money into this safe haven. There was probably some short covering as well. Gold, however, remains in a medium-term and long-term downtrend. Last week's surge may be enough to reverse the short-term downtrend, but resistance is at hand from broken support and the 50-62% retracement zone.
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Key Reports and Events (all times Eastern):
Tue - Jun 17 - 08:30 - Housing Starts/Building Permits
Tue - Jun 17 - 08:30 - Consumer Price Index (CPI)
Wed - Jun 18 - 07:00 - MBA Mortgage Index
Wed - Jun 18 - 10:30 - Crude Oil Inventories
Wed - Jun 18 - 14:00 - FOMC Policy Statement
Thu - Jun 19 - 08:30 - Initial Jobless Claims
Thu - Jun 19 - 10:00 - Philadelphia Fed Report
Thu - Jun 19 - 10:00 - Leading Economic Indicators
Thu - Jun 19 - 10:30 - Natural Gas Inventories
Fri - Jun 20 - 10:30 - Happy Friday!
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.
