After an outside day and weak close on Tuesday, stocks rebounded on Wednesday and the major index ETFs closed modestly higher. Small-caps led the way lower on Tuesday and the way higher on Wednesday. Eight of the nine sectors were up with consumer discretionary, healthcare, materials and energy leading. Consumer discretionary got a boost from media stocks as the Media ETF (PBS) surged 2% after the Supreme Court ruled against Aereo. The chart below shows the Regional Bank SPDR (KRE) breaking out with a surge from mid May to early June. The ETF has since consolidated with support in the 39.25 area and resistance in the 40.5 area. This looks like a flat flag and a breakout would signal a continuation of the prior advance.
**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 moved above 196 in early trading on Tuesday, but quickly reversed and closed below 195. An outside day formed on the daily chart and this could signal overhead resistance in the 196 area. Nevertheless, the short-term trend remains up with the rising channel defining this advance. The lower trend line and mid June low combine to mark key support in the 192-193 area. Trading may turn choppy between 193 and 196, but the upward bias remains as long as key support holds.
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QQQ surged above 93.5 on Tuesday and then fell to close at 92.70. It was an intraday reversal, but the move was not enough to negate the pennant breakout or even challenge the first support level. In fact, the ETF bounced on Wednesday with a move back above 93. The pennant lows mark first support at 91.50. The early June pennant, mid April trend line and a buffer mark key support in the 90-91 area.
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IWM formed an even bigger intraday reversal on Tuesday as it surged to 119 and closed below 117. The move looks drastic for one day, but the overall trend remains up and the ETF managed to bounce on Wednesday. I am raising key support to the 115 area. The mid June lows and mid May trend line combine to mark key support here.
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A weak GDP report put a bid into bonds as TLT surged above its mid June highs and the 10-YR Treasury Yield ($TNX) broke its mid June lows. The breakout is positive and extends the four day upswing. I am marking upswing support at 112. The June lows mark key support for TLT and the June highs mark key resistance for $TNX.
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No change. The US Dollar ETF (UUP) fell over the last two weeks and the immediate trend is down. This still looks like a correction after the breakout-surge in May. The breakout zone, 50% retracement and late May low combine to mark a potential reversal zone in the 21.35-21.40 area. The Euro Index ($XEU) is still below resistance at 137, a break of which would be Euro bullish and Dollar bearish.
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No change. The USO Oil Fund (USO) broke out in early June and surged above 39. The situation in Iraq is likely to remain unstable for a while and this will most affect Iraqi production. This could put a floor on oil prices and limit declines. Last week's low mark first support in the 38.75 area. Broken resistance and the May trend line mark key support in the 38-38.25 area.
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No change. The Gold SPDR (GLD) blew through this resistance zone with a gap and surge above 126. On the daily chart, GLD held above its December low and broke wedge resistance to signal a continuation of the surge from late December to mid March. GLD is obviously overbought right now and the broken resistance zone turns first support in the 123-124 area.
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Key Reports and Events (all times Eastern):
Wed - Jun 25 - 07:00 - MBA Mortgage Index
Wed - Jun 25 - 08:30 - Durable Goods Orders
Wed - Jun 25 - 08:30 - GDP
Wed - Jun 25 - 10:30 - Crude Oil Inventories
Thu - Jun 26 - 08:30 - PCE Price Index
Thu - Jun 26 - 08:30 - Initial Jobless Claims
Thu - Jun 26 - 08:30 - Personal Income & Spending
Thu - Jun 26 - 10:30 - Natural Gas Inventories
Fri - Jun 27 - 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.
