Several major index ETFs are testing their March-April lows and these support zones could produce oversold bounces. The Russell 2000 ETF (IWM), Dow Industrials SPDR (DIA), Rydex S&P Equal Weight ETF (RSP) and S&P MidCap 400 SPDR (MDY) are all testing support from the March-April lows. Also keep in mind that the long-term and medium-term trends remain up. In other words, we have yet to see enough selling pressure to forge a bigger reversal. The short-term trends are down, but these medium-term and long-term uptrends could take over at any time. This makes it a very tricky time for traders, on either side of the fence. On the S&P 500 ETF (SPY) chart, the ETF is toying with the April lows around 136. Even though the ETF broke the April lows and closed below these lows on Wednesday, it has pretty much consolidated in the 134.5-136.5 area the last two days. A move above the Tuesday-Wednesday highs would break resistance and argue for at least an oversold bounce. Failure to bounce and a break back below 134.80 would signal a continuation lower and we could then see a downside acceleration.
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No change. The 20+ Year T-Bond ETF (TLT) started this current risk-off trade with a triangle breakout and move above the April high. Also note that the 7-10 year T-Bond ETF (IEF) is trading near a 52-week high. One must be quite risk-averse to buy instruments with such paltry yields. A breakout in treasuries is negative for stocks, oil and the Euro. Broken resistance and the March trendline mark first support in the 117-117.50 area. Key support remains in the 115.5-116 area.
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The US Dollar Fund (UUP) extended its vertical advance and is now challenging the April highs. After a move from 21.77 to 22.22, the ETF is getting short-term overbought and could be poised for a pause. I am leaving first support in the 21.95 area and key support in the 21.875 area for now.
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No change. The US Oil Fund (USO) broke support in the 39.75 area, consolidated with a rising wedge and then broke down last Thursday. The ETF continued sharply lower and is now quite oversold. Nevertheless, weakness in global equities and strength in the Dollar will continue to weigh on oil. The December low marks the next support level around 36. Broken supports in the 38.5-38.75 area turn into key resistance.
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No change. The Gold SPDR (GLD) fell like a rock as the Dollar continued its surge and equities extended their swoon. GLD broke pennant support and forged a new low. The pennant lows and late April lows becomes the first resistance zone. Key resistance remains in the 162 area for now. 40-period RSI clearly defines the downtrend in gold with at least four failures in the 50-60 zone. A definitive break above 60 is needed to turn momentum bullish.
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Key Economic Reports:
Thu - May 10 08:30 - Jobless Claims
Fri - May 11 08:30 – Producer Price Index (PPI)
Fri - May 11 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.
