Market turns mixed after big advance
After a big advance the prior six days, trading turned mixed as the market consolidated its gains. Over the last seven days, IWM is up 7.74%, MDY is up 7.2%, QQQQ is up 6.13%, SPY is up 5.01% and DIA is up 4.88%. Even though IWM and small-caps led the advance, the ETF has yet to break resistance from its late May and early June highs. Small-caps are lagging on the chart, but leading based on percentage gain. Frankly, I would like to see an IWM breakout to confirm breakouts in the other four ETFs. I am also concerned with a few sector and industry group ETFs that are showing relative weakness on the chart. The Financials SPDR (XLF), Homebuilders SPDR (XHB), Retail HOLDRS (RTH) and Retail SPDR (XRT) all remain below resistance and in downtrends still.
On the daily chart, SPY stalled with a high harami. A harami forms when the body of the current candlestick is inside the body of the prior candlestick. The open and close form the candlestick body. Harami are similar to inside days and they represent indecision that can foreshadow a short-term reversal or consolidation. I refer to this one as a high harami because Wednesday's candlestick is in the upper half of Tuesday's candlestick. Also notice that the candlestick is red, which indicates a down close on Wednesday. With SPY up around 5% in seven days and a harami forming, the ETF is looking and ripe for a pullback or consolidation.
On the 30-minute chart, SPY remains in a clear short-term uptrend. The short-term overbought condition is the only negative here. I am leaving support in the 109.5-110 area. Support here stems from the pennant high and Monday low. In addition, the trendline extending up from the June low comes into play around here. I would also expect RSI to find support in the 40-50 zone on any pullback. Low volume and modestly negative breadth are the keys to a successful pullback. Weakness with high volume and strong downside breadth would not be welcome news for the bulls.
Key Economic Reports:
Thu - Jun 17 - 08:30 - Initial Claims
Thu - Jun 17 - 08:30 - CPI
Thu - Jun 17 - 10:00 - Leading Indicators
Thu - Jun 17 - 10:00 - Philadelphia Fed
Charts of Interest: LTD, M, MOT, QCOM, URBN
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.
