Art's Charts

Oil ETF Forms Bull Flag as Dollar Remains in Downtrend

Stocks corrected somewhat over the last three days, but managed to recover after a weak open on Monday. Risk-on is in the air this morning after the EU agreed to a “fiscal compact”. Stocks futures, oil, gold and the Euro are higher in early trading (4AM ET). On the 60-minute chart, SPY remains in a short-term uptrend defined by the Raff Regression Channel and key support at 130. The decline over the last three days looks like a falling flag that retraced 61.80% of the prior surge (±127.5 to ±133.5). The ETF gapped down on Monday’s open, but immediately rebounded and edged higher the rest of the day. A break above flag resistance would signal a continuation higher. Even though the bigger trend is up, playing breakouts is risky with stocks overbought and the six week trend so mature. In the indicator windows, RSI tested the 40 level as SPY bounced off support at 130. Note that the economic reporting docket is chock-o-block this week and we have lots of earnings reports still to come. Exxon Mobile (XOM), Pfizer (PFE), US Steel (X) and UPS (UPS) report before the open, while Amazon (AMZN), CH Robinson (CHRW), Seagate Tech (STX) and Unisys (UIS) report after the close. 



StochRSI is hyperactive version of RSI. It is the Stochastic Oscillator applied to RSI, which makes it an indicator of an indicator. When the short-term trend is up, StochRSI can be used to identify very short-term oversold conditions with a move below the .20 level. A surge from below .20 to above .80 is the early momentum signal that the short-term uptrend may be resuming. Be careful with this indicator because it is quite volatile. Chartists may even consider adding a 5-day EMA to smooth the line a bit and reduce signals. With this EMA, chartists could simply look for a move above .20 to signal that a new upswing is beginning (green arrows). There were good signals early in the short-term uptrend (late December and mid January), but the signals have soured as the trend becomes extended.

Charts of Interest: ARO, ATVI, CERN, NBR, NTAP, PTEN, VIP

Care out there. It is still earnings season.
ARO Consolidates after Triangle Breakout.
CERN Firms at Key Retracement.
NBR Bounces off Triangle Support.
Plus ATVI, NTAP, PTEN and VIP.

Stocks Remain Overbought as Treasuries Challenge Resistance

Even though the short-term uptrends remain in place, the major index ETFs are overbought and ripe for a correction. Corrections can evolve as pullbacks or sideways trading ranges. A pullback that retraces around 50% of the prior advance (19-Dec to 26-Jan) might be playable for a short-term trader. A sideways trading range, however, would be more complicated. Such a range might involve a break below support and then a bounce back towards the prior high. New support and resistance would then evolve as the range unfolds. Selling short on the first support break after an extended uptrend can be dangerous. On the SPY chart, I am marking key support at 130. Support in the 130-131 zone stems from the Raff Regression Channel, last week’s low and a small buffer. While a break below this support zone would reverse the short-term uptrend, I am concerned that residual demand would trigger a pretty good bounce after such a support break. Not everyone played this rally. Those who missed out may view pullbacks as buying opportunities and this could make for a trading range the next few weeks. RSI support is set at 40. Before moving further, note that it is a very heavy week for economic reports. Stocks are priced for some good news. Any disappointments could be dealt with in a harsh manner.

Indicator Summary Hits +10 as Small-Cap Performance Perks Up

With one more upgrade, all ten indicator groups are in bull mode. Relative performance of small-caps was the lagging indicator, but small-cap performance perked up this month as the $RUT:$OEX ratio broke above its December highs. Even though stocks look short-term and medium-term overextended, there are simply no signs of material selling pressure

SPY Remains in an Uptrend and Overbought

Stocks opened strong and then sold off to close with small losses. A little pop and drop is normal with the stock market so overbought. Even so, selling pressure was not that strong and the short-term uptrends remain in place. All sectors were lower with energy leading the way (-1.35%). The Energy SPDR (XLE) is one of the weakest sectors right now and could lead the way lower on any pullback. On the S&P 500 ETF (SPY) chart, the ETF notched another new high with an open above 133. Prices moved below 132 by the close, but this does not affect the short-term uptrend. First support is set at 130.5 and key support remains at 129. RSI support remains at 40. Even though the ETF is overbought and ripe for a correction, I will continue to respect the short-term uptrend and take this one day at a time.

Charts of Interest: CMA, JCP, JWN, SSP, UIS, WHR

CMA Stalls at Key Retracement.
SSP Consolidates with Triangle Formation.
UIS Bounces off Key Retracement with High Volume.
Plus JPC, JWN, WHR

Stocks Surge and Bonds Fail after Fed Statement

There is nothing like a little Fed frenzy. Stocks surged after the Fed announced an extension of their zero interest rate policy. Treasuries surged ahead of the statement, but gave it all back afterwards. The Dollar fell sharply and commodities surged in the afternoon. Gold was the standout winner with a huge move above $1700. I am not so sure the Fed move is in response to the economy. While nobody really knows the motivations, I think the Fed has calculated how long it will take to fully recapitalize the financial system and low rates are part of this plan. Banks can simply borrow short-term money at excessively low rates and lend longer term for a classic arbitrage to make money. Enough of the funnymentals. On the price charts, the major index ETFs moved to new highs for the month and remain in clear uptrends. SPY closed above 132.50 and I extended the Raff Regression Channel a few notches. This week’s lows mark first support at 130.50 and key support remains at 129. RSI support remains at 40. Even though stocks are overbought and ripe for a pullback or consolidation, there are simply no signs of a reversal or significant selling pressure.

Trading Turns Indecisive Ahead of the Fed

Another blowout quarter from Apple is lifting the Nasdaq futures this morning, but the rest of the market is rather subdued as the Fed’s policy statement looms this afternoon. Stocks ended mixed on Tuesday as indecision continued ahead of the Fed. Small-caps were higher with the Russell 2000 ETF (IWM) and S&P SmallCap 600 ($SML) showing modest gains, but the Dow Industrials SPDR (DIA) and S&P 100 ETF (OEF) were lower. There is not much change on the charts as the S&P 500 ETF (SPY) continues to hold its short-term uptrend. Broken resistance, last week’s low and the Raff Regression Channel mark key support in the 129-129.5 area. RSI support remains at 40. These are the two levels to watch for a trend reversal.

Stocks Turn Indecisive as TLT Breaks Support

It is another big day on the earnings front. McDonalds, Baker Hughes and Air Products report before the open. Apple, Altera, AMD and Yahoo report after the market close. In addition to a big earnings week, we have EU debt wrangling, rumors on Portugal and a FOMC meeting. The US has pretty much one institution orchestrating its debt maneuvers. The EU, on the other hand, seems to have dozens. In addition to the 20 plus member nations, there is the European Central Bank (ECB), the EFSF, the IMF, the European Commission, Merkel, Sarkozy, the finance ministers summits and the heads of state summits. Sounds like a classic case of too many chiefs and too few indians. Turning to the stock market, the S&P 500 ETF (SPY) did a pop, drop and recovery to end the day virtually unchanged. It was an indecisive trading day with doji candlesticks forming on many daily charts.  The short-term trend remains up for SPY, but this uptrend is getting long on tooth. SPY is up some 9% in the last 5-6 weeks without a correction. With another new high for the move, I am extending the Raff Regression Channel and marking key support at 129. Broken resistance, last week’s low and the Raff Regression Channel combine to mark support here. RSI support remains at 40. A break below these levels would reverse the short-term uptrend. 

Charts of Interest: ATVI, FST, GFI, GT, LLY, MMM

Careful out there during earnings season.
ATVI Declines on High Volume
GFI Consolidates Near Wedge Breakout.
GT Forms Pennant after Sharp Decline.
Plus FST,GFI, LLY, MMM