Courtesy of John Nyaradi.
After a consolidation phase, U.S. stock market and ETFs face a huge week of market moving news ahead
After nearly three weeks of consolidation, stocks and ETFs have moved off overbought levels and consolidated between significant support and resistance levels. Major news events lie ahead which are likely to trigger the next directional move in U.S. and global markets.
On My ETF Radar
Major market indexes gave up ground this week as doubts about the future of Europe and the effects of quantitative easing crept back into global financial markets. Economic news was mixed, at best, and technical indicators showed signs of weakening.
In the chart of the S&P 500 (NYSEARCA:SPY) we can see that the index is consolidating between 1420-1480 with significant support at 1400-1420. The columns have switched from Xs to Os, indicating that supply is now in control of the S&P 500 (NYSEARCA:SPY) and, by proxy, the entire U.S. stock market. However, the index remains well above the blue, bullish support line which is the demarcation line between bull and bear markets and the current “buy” signal has an upside price objective of 1550, some 7+% above today’s levels.
For September, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 2.7%, the S&P 500 (NYSEARCA:SPY) added 2.4%, the Nasdaq Composite (NYSEARCA:QQQ) climbed 1.6% and the Russell 2000 Index (NYSEARCA:IWM) added 3.1%.
Overall, major U.S. indexes are in a corrective/consolidation phase within the context of an ongoing bull market uptrend.
ETF News You Can Really Use
Economic News:
For the week, economic reports were mixed with consumer spending rising for August, along with consumer confidence. Weekly jobless claims fell to 359,000, beating estimates and improving from last week’s 385,000. Case/Shiller housing price report indicated that housing prices continue to improve as mortgage rates continue to fall to historically low levels.
On the negative side of the ledger, Europe continues to simmer with protests taking place in Spain and Greece. European business and economic confidence indicators continue to fall and the Eurodollar (NYSEARCA:FXE) has fallen sharply since mid-September as the Mario Draghi induced high starts to wane.
But the biggest shockers in economic reports came from home as August Durable Goods Orders fell -13.2% from last month’s 3.3% and widely missing the expected decline of -5%. Adding to the gloom, Chicago PMI fell to 49.7 from 53, its first time in contraction territory in three years.
In the all important housing sector, new home sales and pending home sales both declined from last month’s levels.
The Week Ahead
The week ahead will bring a data storm of economic news starting on Monday with ISM Manufacturing and Construction Spending. Also Dr. Bernanke speaks on Monday and the minutes of the most recent Fed meeting will be released on Tuesday. Tuesday also brings car sales while Wednesday is ISM Non-Manufacturing and the first Presidential debate. A meeting of the European Central Bank where Spain and its ongoing debt problems will be the likely focus takes place on Thursday along with weekly jobless claims and August factory orders at home. But the biggest news of the week comes Friday with the monthly release of the Non Farm Payrolls and Unemployment Reports for September.
How Can I Profit and Best Bets for ETFs
With markets in consolidation, many participants are looking at the current period as a “buy the dip” opportunity as we begin the 4th Quarter. A bullish bias remains in spite of the current consolidation as markets are supported by central bank activity. Best bets for ETFs appear to be in U.S. indexes and hot sectors include precious metals, commodities and international ETFs.
Bottom line: The week brings major economic news, a Presidential debate and words from Dr. Bernanke, topped off by the all important Non Farm Payrolls and Unemployment reports on Friday. As markets unwind from technically overbought levels, central bankers remain active and autumn seasonality begins to come into play, the bias remains towards the upside as the 4th quarter gets underway.
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