Art's Charts

SPY Turns Indecisive as GLD Fails at Resistance

After a one day oversold bounce, stocks stalled on Tuesday as indecisive candlesticks formed on many charts. The Russell 2000 ETF (IWM) and the Russell Microcap Fund (IWC) closed lower and showed relative weakness. The S&P MidCap 400 SPDR (MDY), however, eked out a small gain and showed some relative strength. The nine sectors were mixed with four down and five up. The chart below shows the S&P 500 ETF (SPY) with a spinning top candlestick forming. Notice that the open and close are nearly equal, which creates a small candlestick body.  Intraday, the ETF surged above 133 and plunged below 131.50, but ended in the middle of its range. Again, a finish in the middle reflects a stalemate between bulls and bears.

XLF Forms Harami - SPY Scores Biggest Gain Since mid March

Stocks rebounded on Monday with mid-caps leading the charge and the S&P MidCap 400 SPDR (MDY) surging 3.82% on the day. All sectors were higher with materials, technology, energy and industrials gaining over 2%. Many of the hardest hit sectors and industry groups saw the biggest gains with this snapback rally. The Finance SPDR (XLF) was the exception as this key sector lagged the market with a paltry 1% gain on the day. On the chart below, XLF formed a harami just above the 200-day moving average. This candlestick pattern signals indecision that sometimes foreshadows a short-term reversal. I am not sure if this bounce is coming because the JP Morgan Chase trading loss is likely to increase and the regulation hounds are out in force.

Charts of Interest: CME, CTSX, HOTT, IMN, ISIL, LUV, SHLD

CME Surges off Key Retracement.
ISIL Forms Pennant after High Volume Surge.
LUV Breaks Flag Resistance on Big Volume.
Plus CTXS, HOTT, IMN, SHLD

Stocks Become Way Oversold as Euro and Gold Bounce

Let the jawboning begin! The G8 came out with a very bold (not) statement over the weekend. In short, they urged Greece to stay in the Euro and said growth issues should be considered. Big deal. There is an EU summit scheduled for Wednesday and we can expect more grandiose announcements without substance. In short, Germany holds all the cards (money) in this game. In fact, it is a question of who blinks first: the Greeks or the Germans. Will Germany let Greece default and exit the Euro if Greece thumbs its nose at austerity again? Or, will Germany blink and authorize more money for Greece regardless of the election outcome? 

Indicator Summary Turns Negative as Selling Accelerates

With a slew of downgrades, the indicator summary moved to -6 and decidedly negative for the first time since December. The bull run was long (5+ months), but the evidence has clearly shifted as selling pressure accelerated this week. Net New Highs for the NYSE turned negative and hit their lowest level since November. The NYSE AD Line broke support with a sharp decline to start a downtrend. Volatility surged as the fear indices, VIX and VXN, broke resistance. At best, it looks like the market has entered a period similar to May 2010 or August 2011. 

MidCaps Lead Lower with Support Break - Gold Surges

The decline in stocks accelerated on Thursday with QQQ and IMW falling over 2% and SPY loosing around 1.5%. This could be the beginning of the end, or it could simply be the middle of a free fall (see August 2011). Stocks are simply in falling knife mode. Of note, the S&P MidCap 400 SPDR (MDY) led the market lower on Thursday with a 2.7% decline on the highest volume since early April. SPY volume is also picking up, but it is nowhere near the selling climax levels seen in August.

SMH Breaks Neckline and IGN Moves Below December Low

There it is again. Stocks opened with a little bounce and then worked their way lower the rest of the day. Every intraday bounce since May 11th has led to renewed selling pressure and lower lows. Buying pressure is weak on the bounce and none-existent after the bounce. The major index ETFs closed lower on Wednesday with small-caps and mid-caps leading the way. Six of the nine sectors were lower with finance, materials and technology leading the way down. The three defensive sectors, utilities, healthcare and consumer staples, closed slightly higher.

Charts of Interest: ADP, AFFX, AMZN, FL, LUV, ROK, WSM

AMZN Stalls after Big Gap.
FL Forms Pennant after High Volume Support Break.
WSM Breaks Flag Support after Big Bull Trap.
Plus ADP, AFFX, FL, LUV, ROK

Dollar and Treasuries Lead the Risk-off Trade

US stocks opened strong on Tuesday, but buyers lost their nerve again and the major index ETFs closed near their lows for the day. Treasuries continued higher as investors sought relatively safety ahead of June elections in Greece. Needless to say, the Dollar soared and the Euro plunged. Commodities plunged with oil and gold dropping over 1%. These all-or-nothing markets are clearly all-in for the risk-off trade. European uncertainly will hang over the markets until at least the 17-June elections, and likely even further.

IWM Breaks Wedge Support with Gap as TLT Hits New High

The risk-off trade was in full force on Monday: treasuries and the Dollar moved higher as stocks, oil and the Euro moved lower. Stocks opened weak, bounced a little and then closed weak as buyers lost their nerve. The major index ETFs remain in short-term downtrends, but are getting oversold and short-term bottom pickers are circling the wagons on this turnaround Tuesday. Treasuries continue to benefit from a flight from risk. Oil is getting hit by weakness in stocks and the prospects for weaker economic growth. Gold continues to be weighed down by weakness in stocks and strength in the Dollar. Greece and the Euro are getting most of the blame for weakness in May. Talk of a Greek exit from the Euro is starting to punctuate diplomatic circles, although you will never here EU officials actually say it. Jean Claude Juncker, President of EuroGroup, which has “political control” over the Euro, stated that there is an “unshakable desire” to keep Greece in the European monetary union (EMU). However strong the commitment, I expect the Euro-Greek situation to remain uncertain (at best) for the foreseeable future. Greece has yet to form a new government and it looks like new elections will be called for in June, which only exasperates the situation.

The US cannot blame Greece and the Euro exclusively though. A batch of weaker-than-expected economic reports hit the market in early May, Cisco provided disappointing guidance last week and JP Morgan Chase disclosed a $2 billion trading loss, which could grow. Also note that the six month cycle just turned bearish for US stocks (go away in May). With the S&P 500 only 5.6 percent from its March high, we could be in for a longer corrective period or at least an extended period of high volatility, such as August-September 2011. Ugh. In any case, the US economy remains the key driver for US stocks and retail sales will be reported today. A miss on this number would prevent a classic turnaround Tuesday today.