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Market Recap For Friday, September 25, 2015 SPY XLY XLV XBI TLT GLD GDX

9/27/2015

Last week I mentioned that we had a rising wedge break on the chart of $SPX. This week the above-mentioned wedge break continued to play out as $SPX dropped further. I think a re-test of August lows around 1860 is still very much in play here.
The chart of SPY (S&P 500 ETF) features further evidence of distribution that is taking place right now. The On Balance volume indicator broke below the low it set in late August on Friday, while the price itself is still over 3% above the August low. As an old Wall Street saying goes: “Volume leads price”, will this time be different?
Charts of $SPX and SPY

Zooming out to a very long-term chart of SPY. Going back to January 1980 we are looking at a chart that is showing long-term trading bias. Today we had a change in the bias from bullish to bearish, when the faster moving average (red) crossed below the slower moving average (green). Notice that we are using market breadth to either confirm or deny our premise of the major bias change. Two of those signals were not confirmed by market breadth, but the rest were. Therefore this setup now gives us a 6 out of 8 (75%) chances that today’s bias change from bullish to bearish would be valid.

Looking further under the hood of the market. The Advance-Decline line for XLY hit a new low for the past 6 months, while the price of XLY is still well above the August lows. It is often the case for market breadth (AD-Line) to be the leading indicator of the move to come.
Chart of XLY

Of the nine SPDR sector ETFs, XLV was the worst performer this week, loosing -5.68%. XLV also closed below its August closing low, while its AD-Line and AD-Volume lines moved to new lows for the move thus confirming the breakdown.
_Chart of XLV

Biotech got taken out to the woodshed and given a beating. First on Monday, Hillary Clinton tweeted about price gouging by the drug companies, then Friday more selling followed. Overall XBI, a broad biotech ETF, lost over 15% for the week also closing below the closing low set in late August. Perhaps selling is overdone for now, but biotech may have lost its status as the market leader.
Chart of XBI

Bonds (TLT) ran into resistance below the 200-day moving average and pulled back. Usually when money is rotating out stocks it finds its way into the bond market. This is happening, but not to the extent I was expecting. Perhaps both bonds and stocks are overvalued and cash is the place to be?
Chart of TLT

Perhaps commodities are benefiting from the money coming out of stocks. Gold gained for the 2nd consecutive week and is up over 8% from the low set in August. Gold managed to close above resistance at $1140, and managed to briefly touch the next resistance level at $1156. Long-term gold is still bearish, but this counter-trend rally may still have some room to run.
Charts of gold and precious metals

Moving on to GDX, gold’s volatile brother, we notice that it is actually down -3.45% for the week, while gold itself is up about ½ percent. Last week on Friday, I pointed out that GDX printed what looked like a “hanging man” candlestick, and if confirmed another re-test of the $13 area is likely. This indeed happened this week as GDX pulled back again to support only to rebound strongly on Thursday. While Friday’s action in GDX leaves much to be desired, it managed to close above the 50-day moving average for the second day in a row – a fit GDX wasn’t able to do since May. This is a positive sign, and as with gold, we may see higher prices in the short term.
Chart of GDX

That’s it for this week’s market recap,
Best Regards and have another great trading week!
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Alexander Berger (www.MasterChartsTrading.com)

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Market recap for friday, september 18, 2015 sPY TLT AGG MUB KRE UUP GLD GDX

9/20/2015

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Following a support break in mid-August, the S&P 500 ($SPX) bottomed out in late August at 1867.01. It then went on to rebound over 8% to the high for the move set this Thursday at 2020.86. The Fed’s decision caused significant selling to take place and Thursday’s candlestick print was a classic Shooting Star – prices spiked intraday only to sell off and finish below the opening by the close. The Shooting star was later confirmed on Friday with more selling. We may now possibly have a rising wedge/bear flag break on the chart of $SPX. Should this break be confirmed, $SPX is likely to retest the October lows again.
Live chart of S&P 500

Fed’s decision to hold short-term interest rates steady was clearly greeted with enthusiasm by bond bulls. Bond funds across the board gained strongly on Thursday and followed through on Friday with more gains. This reaffirms my current defensive posture and I added to my open positions in TLT. Additionally I opened a position in MUB (municipal bonds). There is some overhead resistance for TLT around $123 where the 200-day moving average currently resides, but TLT could easily challenge the resent highs it set at $128, should stocks continue to come under pressure.
Charts of TLT, AGG and MUB

Bank funds saw some of the larger outflows of cash as stocks sold off and bonds rose. KRE – the regional banking ETF had a confirmed Outside Reversal on Thursday. An outside reversal happens when the previous day’s trading range lies completely within today’s trading range. Friday’s gap-and-run lower confirmed this reversal.

Before I get to gold, its worthwhile to take a look at the US dollar index ($USD). Fed’s failure to raise the interest rates put a downward pressure on the $USD. Thursday it broke support and closed below the 200-day moving average. My best guess is that it is going to retest major support in the $93 area for the 4th time in 5 month. For now $USD is still in an uptrend, but should that support at $93 give, this long-term uptrend would be called into question.

Gold prospers when the dollar is under pressure. Again this week we had a strong bounce that took gold to the previous broken support around $1140. Gold is still in a long-term downtrend and I will look for shorting opportunities. However there is no denying that price wants to go higher in the near term. Unless we fail here at $1140, gold could try to challenge the previous recent peak at $1169.
Charts of gold and precious metals

GDX followed suit, and rebounded strongly from support at $13. GDX managed to close above the 50-day moving average – a feat it wasn’t able to achieve since early June. This a positive sign for GDX bulls. On-Balance volume indicator is showing a bullish divergence - GDX traded flat, while the On-Balance volume made a higher low over the past couple of month. Similarly, the Bullish Percent index also is bouncing from extremely oversold level of zero. As with gold, GDX is in a long-term downtrend, but is currently in a middle of a counter-trend bounce.
Chart of GDX here

That’s it for this week’s market recap,

Best Regards and have another great trading week!

** Special Announcement**

We are close (hopefully October 10th) to launching a stocks alert service. Please sign-up for our mailing list to be the first to take advantage of the discounted membership once it becomes available!

Alexander Berger (www.MasterChartsTrading.com)

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