SPY and IWM Hold Consolidates ahead of Big Economic Week
The major index ETFs remain in short-term uptrends, but these uptrends stalled over the last two weeks. While a consolidation after an advance is generally considered a bullish continuation pattern, relative weakness in the Consumer Discretionary SPDR (XLY) and Technology SPDR (XLK) is a concern. The PerfChart below shows XLY and XLK with losses over the last two weeks. Seven of the nine sectors are up, but these two key sectors are down. At this point, I will be watching the lows of the last two weeks for IWM and SPY. These lows mark support and a break would be short-term bearish. Earnings season is winding down and now we get a huge economic week so traders should prepare for a little volatility. The fireworks start with Chicago PMI and the FOMC policy statement on Wednesday. We then get the ISM Index, Jobless Claims and Auto-Truck sales on Thursday. The week ends with the Employment Report and Factory Orders on Friday. Also note that the Nikkei was hit hard again on Monday with a 3.32% decline and the Shanghai Composite fell 1.72%. The Nikkei is down over 5% the last two days.
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Key Reports and Events (all times Eastern):
Mon - Jul 29 - 10:00 - Pending Home Sales
Tue - Jul 30 - 09:00 - Case-Shiller Home Price Index
Tue - Jul 30 - 10:00 - Consumer Confidence
Wed - Jul 31 - 07:00 - MBA Mortgage Index
Wed - Jul 31 - 08:15 - ADP Employment Report
Wed - Jul 31 - 08:30 - GDP
Wed - Jul 31 - 09:45 - Chicago PMI
Wed - Jul 31 - 10:30 - Oil Inventories
Wed - Jul 31 - 14:00 - FOMC Rate Decision
Thu - Aug 01 - 07:30 - Challenger Job Cuts
Thu - Aug 01 - 08:30 - Jobless Claims
Thu - Aug 01 - 10:00 - ISM Index
Thu - Aug 01 - 10:00 - Construction Spending
Thu - Aug 01 - 10:30 - Natural Gas Inventories
Thu - Aug 01 - 14:00 - Auto Sales/Truck Sales
Fri - Aug 02 - 08:30 - Employment Report
Fri - Aug 02 - 08:30 - Personal Income & Spending
Fri - Aug 02 - 10:00 - Factory Orders
Charts of Interest: Tuesday and Thursday
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.
