Tickers discussed: SPY, QQQ, IWM, TLT, UUP, GLD
Upcoming events for this week
- FOMC Rate decision Dec 10-11: FOMC expected to stand pat leaving rates the same. May be some commentary on repo operations and liquidity injections
- UK Elections Dec 12: Boris Johnson & Company polling with a sizable lead
- Sunday December 15 new tariffs scheduled to go into effect. Most expect a punt / delay here, but with jobs number blow out and stock market at highs, Trump may feel emboldened to use some of that capital to press even harder on the Chinese. If no news / clarity by Friday, may be a time to lighten up over next weekend with risk elevated.
The week started off on a down note with a fairly brisk sell off but recovered in V-type pattern to recover and close near the highs. In this process, you’ll notice the weekly candle printed a “hangman doji”. As the name implies, it is a bearish candlestick which takes on more importance as it comes after a long run up. THis candle should warrant caution going forward but it is NOT a sell signal in and of itself. Rather, a sell signal would need some other confirmation. A big red week would do it, coupled with a trend line or support level break on the daily chart. The bulls should be given the benefit of the doubt give the strength and resilience of the rally and recent price action.
Bottom Line: Remain bullish while keeping risk within reason. Regularly move stops up when / if the advance proceeds. THe V-type recovery mid-week is bullish. I expect a bullish week unless trade talks or confirmation of Dec 15 tariff implementation is confirmed.
Like SPY, QQQ had a weekly hangman doji candle. The same comments apply here. No sell signal without price confirmation. Here, as you can see, price is at the top of the channel. We may see price back off a little but I’d expect any weakness to be quickly bought. The bearish divergences persist as they have for months. These divergences wont matter until they do. Something to simply keep filed away. Until there is price confirmation of a sell signal, there is no reason to abandon bullish positioning or posture.
Bottom Line. Stay bullish unless or until price signals to us to change positioning.
Price successfully back-tested the recent breakout and bounced nicely. IWM has a bullish posture and as long as price holds $160 there is no reason not to be bullish here. In fact, IWM most likely offers the possibility of a catch up trade by advancing faster than SPY or QQQ. This is all speculation of course but I’d rather be long IWM in size vs SPY or QQQ. There is more room to the upside simply to reach the prior highs around $173.
Bottom Line. Stay long IWM against $160. I view this trade as the one with the least downside risk than being long SPY or QQQ.
The US Dollar is losing steam from a momentum perspective but not a lot in terms of price. I’d be setting an alarm around $26.25 – $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.
TLT has been struggling to find any steady upward buying pressure for weeks. As long as prices hold $136.50 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.
The bull flag consolidation in gold is getting long in the tooth. While the uptrend remains in tact, the gold safety trade has been waning as equities advance. I can see gold falling to $130 where I’d be a motivated buyer. I am long GDX and KL so unless the metal gets going, those trades will not perform. Watching closely hoping for a spark, but those hopes are fading.
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