Art's Charts

SPY Fills Gap, USO Tests Support and GLD Fails

Programming Note: I will be on family vacation the next two weeks and Art’s Charts will return on Monday, April 16th. Chinese stocks are under pressure again this morning, but US stock futures are holding fairly firm – so far. Perhaps US stocks look good relative to parts of Asia and Europe. On the 60-minute chart, the S&P 500 ETF (SPY) declined to the 140 area and firmed on Wednesday. This area marks Monday’s gap and the flag breakout, which combine for a support zone. Filling the gap-surge is negative, but stocks surged in the final hour and SPY closed near 140.50. I am now re-setting first support at 139.50 and maintaining key support at 138.50. RSI remains in bull mode as it holds above the 40-50 support zone.

Charts of Interest: AMAT, BA, CAKE, DE, MCHP

AMAT Breaks Wedge Support with big Volume.
BA Remains Stuck in Long Consolidation.
DE Declines from Resistance.
Plus CAKE and MCHP

Metals & Mining ETF Leads Market Lower

The Metals & Mining SPDR (XME) continues to show relative weakness as it tests its support zone stemming from the November-December lows. Also notice that the StockCharts Technical Rank (SCTR) confirms relative weakness by holding below 50 for over six months.


Click this image for a live chart

SPY Holds Flag Breakout, but USO Remains in Downtrend

Chinese stocks got slammed on Wednesday and pervasive weakness could weigh on US stocks. The major index ETFs remain in uptrends, but are overbought after big moves on Monday and still quite vulnerable to both a short-term and medium-term correction. On the S&P 500 ETF (SPY) chart, the ETF broke flag resistance with a gap and big move above 141.50, but fell sharply in the final hour of trading on Tuesday. Broken resistance turns first support in the 140-140.50 area. Key resistance is set at 138.50, which is last week’s lows. I am going to leave the RSI setting at 45 periods to capture the short-term trend. There are seven 60-minute bars per day, which means a 45-period RSI covers 6.42 days of trading and keeps it as a relatively short-term indicator. The ideal is to filter out small corrections and keep RSI above 40 during an uptrend. 45-period RSI on the 60-minute chart held 40 in early March and last week, which marked the last two short-term corrections.

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Treasuries remain fairly resilient with a four day advance, but this move still looks like an oversold bounce within a bigger downtrend. Monday’s low marks upswing support and a move below this level would reverse the current upswing. Should this upswing continue, broken support and the Fibonacci cluster mark the next resistance level in the 114.5-115 area. Watch stocks for clues. Continued strength in stocks would weigh on treasuries, but weakness in stocks would likely strengthen treasuries. 



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The US Dollar Fund (UUP) remains in a two week downtrend that exceeded the 61.80% retracement line. While the ETF remains above the late February low, we have yet to see a reversal that would actually forge a higher low. Keep in mind that the ETF forged a higher high in mid March. I am setting key resistance at 22.08 for now. A move above this level would break the mid March trendline and negate the flag break. Also look for RSI to break above 60 to confirm.



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Stocks have been rising and the Dollar falling the last two weeks, but oil cannot sustain a bid and forge a breakout. The US Oil Fund (USO) remains in a downtrend since late February and this decline looks like a falling flag on the daily chart. After a surge late last week, the ETF consolidated within this falling channel and formed a small flat flag. A break above 41 would be the first sign of strength and a move above key resistance would complete the breakout. Look for RSI to exceed 65 for confirmation.



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No change. The Gold SPDR (GLD) broke the string of lower lows and lower highs with a surge above 163 on Monday. This breakout reverses the downtrend and broken resistance turns first support around 162. A strong breakout should hold and a move back below the breakout would question bullish resolve. Also note that the Silver Trust (SLV) has yet to breakout at 32.



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Key Economic Reports:   
       
Wed - Mar 28 - 07:00 - MBA Mortgage Index
Wed - Mar 28 - 08:30 - Durable Orders
Wed - Mar 28 - 10:30 - Oil Inventories
Thu - Mar 29 - 08:30 - Jobless Claims        
Thu - Mar 29 - 08:30 - GDP    
Fri - Mar 30 - 08:30 - Personal Income & Spending   
Fri - Mar 30 - 09:45 - Chicago PMI    
Fri - Mar 30 - 09:55 - Michigan Sentiment

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.

Dollar Extends Downtrend as Gold Surges above Resistance

Stocks moved sharply higher on Monday with small-caps leading the charge. Sector-wise, the technology, consumer discretionary, finance, industrials and healthcare sectors gained over 1.5% to show upside leadership. It was yet another a broad market surge within an uptrend that began way back on 19-Dec. On the S&P 500 ETF (SPY) chart, the ETF fell to the 138.5 area with a falling flag and broke flag resistance with a gap. StochRSI offered the only way to play this breakout because this sensitive momentum oscillator broke above .60 on Friday morning, a day before the price breakout. With SPY back above 141.50, the uptrend is affirmed and short-term conditions are once again overbought. Broken resistance in the 140-140.5 area turns into first support. Key support is now set at 138.50.



Before moving further, note that I set RSI at 45 periods on the 60-minute chart for SPY. This is a little experiment in trend fitting, or curve fitting as some may call it. Basically, the assumption is that RSI should hold 40 in an uptrend. 14-period RSI broke 40 in early March and last week, but the uptrend in SPY continued with the ETF hitting new highs soon thereafter. A 45-period RSI, on the other hand, held 40 in early March and 50 last week to capture the uptrend. A break below 40 would, perhaps, signal an end to this uptrend. Of course, a deeper decline is now needed to push 45-period RSI below 40.

Charts of Interest: ALK, AMX, FCX, LUV, MCP, MON, XRX

AMX Surges above Resistance with Good Volume.
LUV Bounces off Support with High Volume.
MON Consolidates with Tight Triangle.
Plus ALK, FCX, MCP, XRX

QQQ Forms Pennant/Wedge as UUP Breaks Flag Support

Stocks got an oversold bounce with small-caps, materials and energy leading the way on Friday. Despite this bounce, these three are lagging the broader market overall, which means this is a case of the worst hit groups getting the best bounce. Relative weakness in small-caps and the deterioration in breadth remains a concern for the stock market. Even though the trends since 19-Dec remain up, relative weakness in small-caps could be a leading indication that we are on the cusp of corrective period. Corrections can evolve as pullbacks that retrace a portion of the prior advance, sideways consolidations or a combination of the two. On the 60-minute chart, the S&P 500 ETF (SPY) peaked above 141 on Monday and then worked its way lower the rest of the week. A falling flag of sorts could be forming with broken support turning first resistance at 140. A move above this level would break falling flag resistance and signal a continuation higher. Barring such a breakout, broken resistance and the 50-61.80% retracements mark the next support zone for this correction.




 

 
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Treasuries remain stubbornly strong. Perhaps the slowdown in China and overbought conditions in US stocks are putting a bid into treasuries. The 20+ Year T-Bond ETF (TLT) broke resistance at 112, consolidated with a small flat flag and continued higher. Broken resistance and the Fibonacci clusters mark the next resistance zone in the 114.5-115 area. The flag lows mark support at 111.90.



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The US Dollar Fund (UUP) broke rising flag support and declined to the 61.80% retracement line on Friday. The trend since mid March is down and this flag break signals a continuation lower. I am marking resistance at 22.15. A move above this level would break the mid March trendline and negate the flag break. RSI resistance remains at 60 and a break above this level would confirm a bullish breakout in UUP.



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After a big surge in February, the US Oil Fund (USO) corrected with a slight downtrend the last four weeks. On the daily chart, this pattern looks like a falling flag, which is a bullish correction. However, the correction does not end until there is a decisive break above 41.50 in USO and 65 in RSI. Until such a break, further weakness or flat trading is expected. 



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The Gold SPDR (GLD) continues to zigzag lower with a series of lower lows and lower highs this month. After a move to 158 last week, the ETF rebounded with a strong move to resistance on Friday. Broken support and last Monday’s peak mark resistance here. Follow through and a breakout would be bullish for bullion. The Silver Trust (SLV) is shown in the indicator window with a falling wedge and resistance at 43.



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Key Economic Reports:   
       
Mon - Mar 26 - 10:00 - Pending Home Sales        
Tue - Mar 27 - 09:00 - Case-Shiller 20-city Home Index        
Tue - Mar 27 - 10:00 - Consumer Confidence        
Wed - Mar 28 - 07:00 - MBA Mortgage Index
Wed - Mar 28 - 08:30 - Durable Orders
Wed - Mar 28 - 10:30 - Oil Inventories
Thu - Mar 29 - 08:30 - Jobless Claims        
Thu - Mar 29 - 08:30 - GDP    
Fri - Mar 30 - 08:30 - Personal Income & Spending   
Fri - Mar 30 - 09:45 - Chicago PMI    
Fri - Mar 30 - 09:55 - Michigan Sentiment

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.

Indicators Remains Positive Overall, but McClellans Weaken

The indicator summary remains firmly positive with relative weakness in small-caps the only concern in the market right now. Well, I am also concerned with overbought conditions that could lead to a corrective period ahead. Nevertheless, we have yet to see any signs of significant selling pressure. The current advance is six months old and the S&P 500 up over 25% from its October low. At this stage, I would not be surprised to see a 3-4 week pullback. But when? That, of course, is the $64,000 question. I am noticing that breadth momentum is waning significantly on the NYSE and Nasdaq. The McClellan Oscillators peaked in early February and spent much of March in negative territory ($NAMO, $NYMO). 

SPY Forms Potential Bull Flag as UUP Forms Bear Flag

The second shoe dropped for the S&P 500 ETF (SPY) and Russell 2000 ETF (IWM), but the Nasdaq 100 ETF (QQQ) held up rather well (surprise, surprise). I heard an interview with Barry Ritholtz talking about the four asset classes: stocks, commodities, bonds and Apple. While Apple sentiment is extremely one sided, the story is as compelling as ever and their products are truly unrivaled for now. Turning back to stocks, we have now seen a three to five day correction. DIA has been under mild selling pressure for five days, while IWM pulled back over the last three days. For the very short-term, some stocks are oversold and those who missed the rally are seeing discounts. On the SPY chart, the ETF pulled back with a potential falling flag taking shape. Thursday’s gap down is holding and the flag is still falling as broken support turns first resistance around 140. StochRSI bounced off the zero line a few times and its 5-day EMA bounced around .20, both of which reflect short-term oversold conditions. Look for a surge above .60 to signal a rebound in momentum that could reignite the uptrend.






 
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Treasuries will likely benefit as long as stocks remain soft or in corrective mode. The 20+ Year T-Bond ETF (TLT) surged back above 112 and then consolidated with a flat flag. A break above Thursday’s high would signal a continuation higher, while a break below the low would argue for a pullback.



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I am not impressed with this bounce in the Dollar over the last few days. After hitting the 50-61.80% retracement zone around 22, the US Dollar Fund (UUP) edged higher with very choppy and tentative action. The advance over the last four days looks like a rising flag, which is a bearish continuation pattern. A move below support would signal a continuation lower.



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The US Oil Fund (USO) continued lower on Thursday and energy stocks got hammered. The trend in USO is clearly down after the failure at 41.50 and return to support the last three days. Overall, a falling channel is taking shape with a zigzag lower. There may be some support around 40, but a convincing move above 41.50 is needed to reverse the downtrend. Before getting too bearish, note that the bigger trend for oil remains up and this four week decline still looks corrective on the daily chart.



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The Gold SPDR (GLD) continued lower and broke below last week’s low to extend its downtrend. Longer term, GLD is still near a key retracement (61.80%) on the daily chart. However, gold cannot hold a bid and the trend here is clearly down. Broken support turned resistance and a break above this week’s high is needed to reverse the downtrend.



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Key Economic Reports:   
       
Fri - Mar 23 - 10:00 - New Home Sales    

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.

SPY Forms Bear Pennant as UUP Bounces off Retracement

Is the second shoe about to drop? Stocks fell sharply on the open Tuesday and then consolidated since this open. Short-term, and I do mean very short-term, the S&P 500 ETF (SPY) held the gap down and formed a pennant consolidation on the 60-minute chart. A break below 140 would signal a continuation lower and open the door to a retracement of the nine day surge from 134 to 141. A 50% retracement of this move would carry back to the 137.5 area, which also marks support from broken resistance. In the indicator window, RSI is stalling near 50 with a consolidation of its own. StochRSI moved to zero a couple times and has yet to recover. Look for StochRSI to surge above .60 to get a bounce started or signal improving upside momentum.