It was a rough week for the stock market. The S&P 500 lost 2.43% and all sectors moved lower, even the defensive sectors. The Consumer Discretionary SPDR (XLY) and Technology SPDR (XLK) lost around 2.5%, while the Finance SPDR (XLF) fell over 3% and the Utilities SPDR (XLU) lost a whopping 4.38%. Utilities were slammed on fears of an increase in taxes on dividends. The consumer discretionary sector will get a big test when retail sales are reported on Tuesday.
The markets were clearly in risk-off mode as treasuries surged and the Dollar edged higher. In an interesting twist, gold and oil also moved higher. Yes, the Gold SPDR (GLD), the US Oil Fund (USO) and the US Dollar Fund (UUP) advanced last week. GLD is at a moment-of-truth as it hits resistance from broken support. USO shows signs of firmness the last two weeks and the Dollar remains in breakout mode. Something may need to give here.
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On the S&P 500 ETF (SPY) chart, the ETF is trading near the lower trend line of a falling channel. SPY is also oversold after a 3.5% plunge the last 2-3 days. Broken support turns first resistance in the 140.5-141 area. I am going to leave key resistance at 143.70 for now. The indicator window reflects the current risk-off environment as the 10-year Treasury Yield ($TNX) and the Euro ETF (FXE) fall along with the S&P 500. Upside breakouts in all three are required to put risk back on the table.
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This is the spookiest move of all. The 20+ Year T-Bond ETF (TLT) broke channel resistance with a huge surge last week. Strength in TLT signals risk-off, economic weakness or worse. With this big move, treasuries are as overbought as stocks are oversold. Broken resistance turns first support in the 123-123.5 area. Key support remains at 121.7 for now.
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The US Dollar Fund (UUP) broke resistance with a big move in early November and edged higher the last few days. The breakout is bullish and holding. Broken resistance turns into first support in the 21.95 area. Key support remains at 21.85 for now. A pullback in the greenback could help gold, oil and stocks, but further strength would be bearish for all three.
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The US Oil Fund (USO) plunged along with stocks on Wednesday, but firmed on Thursday and actually bounced on Friday. Even though there is some support in the 31.5-32 area, the overall trend is down with key resistance at 33.10. Broken support, the September trend line and the early November high mark resistance here.
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This is a moment-of-truth for gold. The Gold SPDR (GLD) surged some 3% with a move back to 168. Broken support, the late October high and the 50% retracement combine to mark resistance here. Gold is currently short-term overbought as well. There is a clear up swing the last five days and I am marking swing support at 166. A break below this level would signal a failure at resistance and continuation lower.
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Key Reports and Events:
Wed - Nov 14 - 07:00 - MBA Mortgage Index
Wed - Nov 14 - 08:30 - Retail Sales
Wed - Nov 14 - 08:30 – Producer Price Index (PPI)
Wed - Nov 14 - 10:00 - Business Inventories
Wed - Nov 14 - 14:00 - FOMC Minutes
Thu - Nov 15 - 08:30 – Jobless Claims
Thu - Nov 15 - 08:30 – Consumer Price Index (CPI)
Thu - Nov 15 - 08:30 - Empire Manufacturing
Thu - Nov 15 - 10:00 - Philadelphia Fed
Thu - Nov 15 - 11:00 - Crude Inventories
Fri - Nov 16 - 09:15 - Industrial Production
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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