Stocks surged out of the gates to start 2013 and the S&P 500 ETF (SPY) closed at its highest level of the year (13 days). Buying pressure continues has we head into a big week for earnings. Some 100 reports are scheduled today, around 120 on Wednesday and over 200 on Thursday. It is going to be a busy, and perhaps volatile, week. Apple reports on Wednesday after the close. With the S&P 500 trading at a 52-week high, stocks are clearly priced for some good news. Economic news has been positive overall and this could give way to positive earnings news, on the whole. My concern is that we get a buy-the-rumor and sell-the-news scenario when earnings season ends. Also note that stocks are overbought after sharp advances that began on 31-December and 15-November. The chart below shows the S&P 500 Equal-Weight ETF (RSP) advancing around 12% from its 15-Nov low and 7% from its 31-Dec low. These are some significant moves. RSP broke to new highs with the gap above 54 on 2-Jan and continued working its way higher the last 2-3 weeks. A large rising channel is taking shape over the last 2-3 months with a smaller rising channel over the last 2-3 weeks. Short-term support is set at 55.2 and medium-term support in the 54 area.
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Key Reports and Events:
Tue - Jan 22 - 10:00 - Existing Home Sales
Wed - Jan 23 - 07:00 - MBA Mortgage Index
Thu - Jan 24 - 08:30 - Jobless Claims
Thu - Jan 24 - 10:00 - Leading Indicators
Thu - Jan 24 - 10:30 - Natural Gas Inventories
Thu - Jan 24 - 11:00 - Oil Inventories
Fri - Jan 25 - 10:00 - New Home Sales
Fri – Mar 01 - 23:59 – Sequester Takes Effect
Wed – Mar 27 - 23:59 – Government Shut Down Deadline
Sun – Mar 31 - 23:59 – Debt Ceiling Deadline
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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