QQQQ, SPY AND XLY FORM SMALL CONSOLIDATION PATTERNS .... With stocks trading flat the entire week, consolidation patterns formed in a number of key ETFs. Chart 1 shows the Nasdaq 100 ETF (QQQQ) surging above its summer highs and then consolidating around 49 this week. QQQQ gapped above 49 to last Friday, but then simmered down to form five red candlesticks this week. Watch the consolidation boundaries for the next directional signal. A break above last week’s highs signals a continuation higher, while a break below last week’s low argues for a pullback. Broken resistance turns into the first support zone around 47. The indicator window shows the Commodity Channel Index (CCI) moving below 100 for the first time since the second week of September. CCI is no longer overbought and remains bullish as long as it holds above zero. Chart 2 shows the S&P 500 ETF (SPY) with a consolidation around 114 this week. Chart 3 shows the Consumer Discretionary SPDR (XLY) with a consolidation around 33.5 this week
DOLLAR HITS SIX MONTH LOW ON QE2 CONCERNS... Falling interest rates and quantitative easing 2.0 (QE2) continue to weigh on the US Dollar Index ($USD). In a speech this morning, NY Fed president Dudley suggested that further easing is needed to stimulate employment and sustain economic growth. With short-term interest rates already low, this means the Fed will have to use other means for further easing, such as QE2. Chart 6 shows the $USD breaking below support from the prior lows with a sharp decline the last two weeks. The Dollar is not impressed with the combination of QE2 and continued low interest rates. More easing means more printing that will dilute the value of the greenback. The indicator window shows $USD with the 2-yr Treasury Yield ($UST2Y). Notice that the yield peaked in early April and moved sharply lower the last six months. The Dollar peaked two months later, after the Euro crisis, and moved lower the last four month. The Euro crisis was the only thing holding the Dollar up in May.
We have also seen a significant decoupling between short-term interest rates and stocks in September. Chart 7 shows the 1-yr Treasury Yield ($UST1Y) and the $SPX moving step-for-step from January until late June. Even though stocks surged in July, short-term rates continued moving lower. Stocks fell again in August as rates remained low. Rates remained at relatively low levels during the September surge in stocks. Rising rates would signal confidence in the economy, which would be positive for stocks. Continued low short-term rates signals potential weakness in the economy, but stocks are rising nonetheless. It is a bit of a conundrum. With interest rates so low, stocks are one of the few investment alternatives out there. Perhaps that is why stocks are rising.
GOLD, SILVER AND PLATINUM ADVANCE AS DOLLAR ALTERNATIVES... Precious metals continue to attract money as currency alternatives. New lows in the US Dollar Index have been accompanied by new highs in gold and silver. Chart 8 shows the Gold SPDR (GLD) closing at another 52-week high on Friday. Gold is overbought, but shows no signs of slowing down. Broken resistance around 122.5 turns into the first support zone to watch. The most recent surge in gold coincided with the sharp decline in the US Dollar. Chart 9 shows the Silver ETF (SLV) also closing at a 52-week high on Friday. Silver has kept page with gold since late August. Chart 10 shows the Platinum ETF (PTM) breaking resistance in September and broken resistance turning into support. The ETF is lagging gold and silver because it remains below its April high, but moved into bull mode with the breakout this month.
OIL AND GASOLINE BREAK THROUGH RESISTANCE ... Oil finally started making up for lost time with a big surge this week. Despite strength in stocks and weakness in the Dollar throughout September, oil remained below its mid September high the latter part of the month. Broken support around 34 turned into resistance and was holding. Things suddenly changed the last three days. Chart 11 shows the USO Oil Fund (USO) breaking out with the biggest weekly gain since March. USO also broke above the May trendline. Broken support and the August high combine to mark the next resistance zone around 37-38. Chart 12 shows the US Gasoline Fund (UGA) following oil higher with a breakout as well. Broken support turns into the first resistance zone around 36-37.
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发表于 2010-10-1 23:59
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