Art's Charts

Markets Make a Hard Risk-off Turn on Monday

The market made a statement on Monday. After a big risk-on move last week, the market made a hard turn towards risk-off on Monday. It is just one day, but a bad week would likely suggest that the medium-term bullish signals seen over the last two weeks have been negated. The Euro led things off with a massive decline that erased last week’s gain. This triggered trendline breaks in the US Dollar Fund (UUP) and 20+ year Bond ETF (TLT). Stocks and oil weakened, but did not reverse their short-term uptrends. It is a big week on the reporting front and any disappointments would further Monday’s risk-off mood.

The S&P 500 ETF (SPY) broke upswing support with a gap down on the open. After stalling most of the day, the ETF moved sharply lower in the final hour. The combination of a weak open and weak close indicates that buyers were not willing to step in after the initial drop. Overall, the rising blue channel remains in place to capture the short-term uptrend. Key support remains at 122. The swing within this channel is down with resistance marked at 128.

Charts of Interest: AAPL, BAX, GME, NXY, SPLS

AAPL Forms Bear Flag.
GME Forms Shooting Star Near Resistance.
Upside Volume Surges for NXY.
Plus BAX and SPLS

Stocks Become Overbought as Big Economic Week Looms

First, note that stocks remain in strong uptrends since the October 4th reversals. Second, the major index ETFs are quite overbought. IWM is up over 24% the last 19 days. SPY is up almost 17% and QQQ is up just over 15%. These are huge gains in just four weeks. Such strong moves often herald the start of a medium or long-term trend change, but overbought conditions increase the chances of a correction period first. Third, it is a huge week for economic reports. Chicago PMI is Monday, the ISM Manufacturing Index is Tuesday and the FOMC policy statement is Wednesday. The week finishes with ISM Services and Factory Orders on Thursday and the employment report on Friday. Stocks have already priced in some pretty stellar numbers. Worse-than-expected economic numbers would weigh on market.

The S&P 500 ETF (SPY) is currently trading near the upper end of the Raff Regression Channel and holdings Thursday’s big gains. The blue channel marks the bigger uptrend with support at 122. The green channel marks the current upswing within this bigger channel. A move below 127.1 would reverse this smaller upswing. Note that this is a very steep Raff Regression Channel. Instead of extending the lower trendline to mark support, I am basing support on the end of the lower trendline. This is tanother method for using the Raff Regression Channel to estimate support or resistance.







**************************************************************************

Treasuries are in for a possible big week. Better-than-expected economic reports would further weigh on Treasury prices. Worse-than-expected reports would be positive. TLT remains in a downtrend after the continuation support break around 114. This area turns into the first resistance zone. Key resistance remains at 117.



**************************************************************************

The US Dollar Fund (UUP) remains in a clear downtrend with a falling channel taking shape. The ETF broke support in the 21.6-21.7 area and this area turns into resistance. Also note that this ETF is oversold after a four week decline without a bounce. RSI remains in bear mode as long as the 50-60 zone holds. Look for a break above 60 to turn momentum bullish again.



**************************************************************************

The US Oil Fund (USO) benefitted from strength in stocks and weakness in the Dollar throughout October. The trend remains up, but USO is also overbought and ripe for a correction or pullback. The ETF established short-term support around 34.5 from broken resistance and last week’s low. There is also the trendline extending up from early October. A break below this level would reverse the short-term uptrend. The indicator window shows CCI (90). I set this level because it captures the entire uptrend. CCI did not dip below the zero line the last 3+ weeks. A move into negative territory would show the first sign of weakening momentum.



**************************************************************************

There is no change on the Gold SPDR (GLD) chart. Even though trading was erratic from late September to mid October, the trend is clearly up after the surge above 162-164. The overall GLD trend is up since the last week of September, while the Dollar trend is down since the first week of October. Broken resistance turns into the first support zone in the 162-164 area.



**************************************************************************

Key Economic Reports:                                               
           
Mon - Oct 31 - 09:45 - Chicago PMI        
Tue - Nov 01 - 10:00 - ISM Index    
Tue - Nov 01 - 10:00 - Construction Spending    
Tue - Nov 01 - 15:00 - Auto/Truck Sales    
Wed - Nov 02 - 07:00 - MBA Mortgage Index    
Wed - Nov 02 - 07:30 - Challenger Job Cuts        
Wed - Nov 02 - 08:15 - ADP Employment Change    
Wed - Nov 02 - 10:30 - Oil Inventories        
Wed - Nov 02 - 12:30 - FOMC Rate Decision        
Thu - Nov 03 - 08:30 - Jobless Claims    
Thu - Nov 03 - 10:00 - Factory Orders    
Thu - Nov 03 - 10:00 - ISM Services    
Fri - Nov 04 - 08:30 - Employment Report    

Charts of Interest:    Tuesday and Thursday in separate post. 

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.

Indicator Summary Surges into Positive Territory

As noted last week, another strong move in the stock market would likely turn the indicator summary positive. That is indeed what we got, especially with Thursday’s surge. The NYSE AD Line and Nasdaq AD Volume Line surged through resistance levels. New 52-week highs expanded as the cumulative new highs lines moved above the 10-day EMAs. Perhaps most importantly, the major index ETFs broke above resistance levels marked by the late August and/or mid September peaks. Even though this move turns the indicator summary positive, keep in mind that stocks are overbought after a big October run. SPY is up over 15% and IWM is up around 20% from their early October lows.

Stocks Surge to Extend Uptrends and Overbought Conditions

Stocks surged on the open and closed strong with all boats rising. Small-caps and mid-caps led the advance, which shows a strong appetite for risk. All sectors were up with the Finance SPDR (XLF) surging almost 6%. Whether short covering or new buying, Thursday’s advance is setting the S&P 500 up for its best month since 1974. Who, who, who let the bulls out? I guess it was the EU and their bazooka. Thursday’s advance marked an extension of uptrends that were in force since early October. There was a rest or consolidation period in the middle of the month and the uptrends resumed in force late last week. With massive moves the last five days, stocks are again short-term overbought. IWM is up over 11% since last Thursday and SPY is up around 5%. On the chart, SPY continues with its series of rising peaks and rising troughs. Broken resistance and the gap around 125-126 turn into the first support zone to watch. Key support remains at 122.

Trading Turns Choppy, but SPY Uptrend Holds

Stocks started the day weak with large-cap techs leading the way lower early Wednesday. QQQ opened with a move below 56.5 and was down some 1.7% at one point. However, the bulls showed their resilience as stocks rallied back by the close. QQQ returned to positive territory. Small-caps led the recovery with a 1.7% gain in IWM. The finance sector was one of the leading sectors as banks looked forward to another bailout. The consumer discretionary sector was one the clear laggards as weakness in retailers weighed. Relative weakness in retail not a good sign, but it is just one day for now.

SPY remains in an uptrend since early October. The ETF surged off the October lows with a strong advance the first two weeks and then started zigzagging higher. The ETF has a series of higher highs and higher lows working the last two weeks. There can be no downtrend until this series is broken. A rising channel as taken shape with the lower channel extension marking support in the 122 area. This support level is confirmed by the Wednesday morning reversal. The zigs and zags within this rising channel form the smaller swings. With the afternoon surge, the swing turned up as SPY broke the flag trendline. However, SPY did not follow through with a break above the minor resistance line put forth yesterday. Let’s see how the bulls feel in the morning.

Charts of Interest: AFFX, AKAM, AMKR, MDR, SLB, WFT

Careful, it is still earnings season.
AKAM Forms Pennant after Big Surge.
AMRK Consolidates with Triangle.
SLB Forms Bull Flag after Trendline Break.
Plus AFFX, MDR, WFT

Stocks Fall Sharply as Treasuries and Gold Break Out

Do yourself a favor. Don’t read about the EU summit. As Mickey Blue Eyes might say: Fuggedaboutit! Focus on the price charts. All known information is reflected in the charts. In fact, there is also likely a little bit of unknown information in the charts as well. Stocks fell sharply on Tuesday. Worse-than-expected earnings from 3M (MMM) and Cummins (CUM) weighed on the market and the industrial sector. Even though the short-term swing reversed down, the bigger swing (since early October) remains up. SPY surged in early October and then started zigzagging higher the last two weeks. There is a clear series of rising peaks and rising troughs. I am setting key support at 121. A move below this level would break the end point of the Raff Regression Channel. Within this rising channel, the shorter swing is down after the support break at 124.40 on the open. A smaller channel has been drawn with resistance marked just below 125. A move above this level would reverse this smaller downswing. RSI move below 50 to turn momentum bearish. A move above 50 and above the 10-day SMA is needed to reverse this signal.

Stocks Extend Gains, but Treasuries Firm

It is getting close to crunch time for the EU. How many times have we heard this before? Anyhow, yet another deadline is approaching and there are still rifts between Germany and France on the size, scope and leverage for the bailout fund. Stocks extended their advances on Monday with big moves. The Dollar moved lower, while oil, gold and the Euro moved higher. Treasuries were the odd man out on Monday. Even though most of the market was clearly in risk-on mode, Treasuries were only down slightly and actually held up pretty good considering. Perhaps some traders are taking out a little insurance ahead of the EU announcement.

The S&P 500 ETF (SPY) extended its upswing with a move above 125. The ETF is now up around 5 points (4%) since Thursday noon. The gray Raff Regression Channel shows the current upswing within the bigger rising channel. A move below 124.40 would reverse this smaller upswing. The blue Raff Regression Channel defines the bigger upswing. A move below 121 would reverse this upswing. RSI moved above 70. While this is traditionally thought of as overbought, I simply consider RSI bullish above 50 and bearish below 50.

Charts of Interest: AMX, CHS, NTAP, POT, STI, SWKS, TMO

AMX Breaks Flag Resistance with Volume.
CHS Bounces off Flag Support.
STI Surges to Challenge Resistance.
Plus NTAP, POT, SWKS, TMO