Tickers discussed: SPY, QQQ, IWM, TLT, UUP, GLD, GDX SPDR Sector Charts
The Weekend Profit Navigator provides a recap of the prior week’s price action and a look ahead to the following week’s stock market outlook. Key levels and trading locations for the indexes are provided, along with trading plans and timely commentary to keep you on the right side of the trade
Upcoming events for this week
- Fed speakers hit the circuit with 3 presentations on Tuesday ( Kaplan, Rosengren, Williams ) and 1 on Wednesday ( Evans ) this week.
- Quad Witching on Friday Dec 20
Market Overview This past week we saw 3 potential market “dragons” killed. 1. The FOMC triple confirmed they are on the sideline for the foreseeable future and also confirmed they will be injecting a massive $500B in fresh liquidity over the new few weeks into the new year. 2. UK elected Boris Johnson in a landslide thus removing uncertainty and clearing a path to BREXIT early in the new year. 3. Phase 1 China Trade Deal. Although this one is more shaky than the others, it looks as though at the very least new tariffs are put on hold. Lots of fake news on the trade front, but as long as new tariffs are not instituted, I think trade is at worst market neutral. We are coming into a seasonally strong period through the end of the year. Fund managers will / should be chasing beta and attempting to window dress their positions into year end.
Bottom Line: Lean bullish but not blindly so. Understand that the bearish divergences present across SPY and QQQ have not gone anywhere so risk is still present. So too is the junk market structure beneath price. Gap upon gap upon gap. From a technical point of view, the market structure is very weak. These locations will act as magnets when / if corrective activity ever hits the market. Have these locations handy on a sticky note. They will be downside targets down the road. The FED is propping this market up with massive liquidity and balance sheet expansion. Until that changes though, it should be supportive of higher prices.
Price walking along the top side of the rising channel. The RSI and PPO are both positive and are supportive of higher prices although bearish divergences remain well intact. Last week’s low near $307 marks a good location to “shoot against” on the long side. Below $307 and things would get iffy. We never back-tested the breakout at $302 / $301 but if price loses $307 a move lower would be favored. As it stands now, there are no natural sellers as we sit at the highs. I’d expect, in the absence of big market negative news, we move higher into the end of the year.
Bottom Line: Remain bullish while keeping risk within reason. Regularly move stops up as the advance proceeds.
Like SPY, QQQ is at the highs. Unlike SPY however, QQQ has a steeper and narrower rising wedge. Room to the downside before a technical sell signal would be triggered is less. A break of the blue uptrend line at around $201.50 would trigger a sell signal with a break below last weeks low at $199.85 confirming the sell signal and favoring more downside. Like SPY, bearish divergence persists.
Bottom Line. Stay bullish unless or until price signals to us to change positioning.
Although IWM under performed this week it remains in a bullish posture. Price successfully back-tested the recent breakout and bounced nicely. The blue box shows the upside potential for price as it reaches for the prior highs of 2018 around $173.
The US Dollar continues to slowly lose steam and looks poised for a test of the 40ema at $26.42 on $UUP. I’d be setting an alarm around $26.40 – $26.35. A weekly break below these levels will mark a longer term sell signal on the Dollar that could well last a year or longer. It is a trade that you want to be aware of even if you don’t take it. Will have big implications for precious metals, emerging markets, and multi-nationals who derive a significant portion of sales outside the US.
Bonds did not fully buy in to the “trade war is over” narrative as prices rose 0.5% on the week. Still, TLT has been struggling to find any steady upward buying pressure for weeks. As long as prices hold $136.25 and at worst the rising 40ema the overall uptrend remains in tact. I’d be a buyer in the $136.50 range with a tight stop below. Most likely would need a equity sell off to spark a rally here. The economic data has been strong. On the upside, a break and hold above $140 would signal a breakout.
Gold is making progress but it’s slow going. Gold Bulls need to see a break above $140.50 to instill confidence and bring in more buyers. The miners via $GDX is gaining in relative strength but unless the metal gets a move on, its hard to see the miners sustaining much of a move. Disc> I am long GDX and $KL.
************************ SPDR Sector Weekly Chart Update. *****************
Rather than provide commentary on every single chart, I have marked the key levels and annotated each chart with brief commentary.
There are no bearish charts. Even Energy has broken it’s long standing downtrend and is perking up. The closest thing to a tight set up on these charts is $XLY that has been stuck do to $AMZN not moving higher. If AMZN takes off, $XLY will break out and would be a good one to grab. Alarm $124 on $XLY. Like I said, the rest of the key locations are marked.
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