Nice Bounce And Another Big, Big Week


Major U.S. stock indexes and ETFs enjoyed a nice bounce in a big news week and now face more market moving news ahead.

U.S. stock indexes and ETFs advanced this week after nearly three weeks of consolidation on good employment news and the hope for more central bank intervention.  It’s election season and Presidential politics will start to play a roll in market action, along with the rapidly approaching fiscal cliff and Dr. Bernanke and Mario Draghi continuing to pull the levers behind the curtain.

On My ETF Radar

S&P 500 chart (SPY, NYSEARCA:SPY)

chart courtesy of

As always, the chart tells the story, and in the point and figure chart above we can see that the S&P 500 (NYSEARCA:SPY) is in a bullish configuration with an upside profit target of 1550, some 6+% above today’s levels.  This week, the column of “Os” was replaced by a column of “Xs” which indicates that demand has regained control of the markets.  However, the advance stopped exactly at the resistance level of 1470 and so now this major index will need to close convincingly above that level for this uptrend to continue. 

All of this short term action takes place within the context of an ongoing bull market with downside support at 1440 and a trend change/major support at 1370.

ETF News You Can Really Use

Economic News:

It was a big data week with September Non Farm Payrolls and Unemployment taking the headline spot on Friday.  September Non Farm Payrolls rose to 114,000, beating expectations but below August’s 142,000, and unemployment dipped to 7.8% from 8.1% the month before.  The 7.8% level is the lowest in nearly four years, and when coupled with weekly claims beating expectations, more evidence suggests that easy money policies might be starting to work.  Adding to the hopeful atmosphere, ISM Manufacturing and Non Manufacturing improved and car sales rose.

In California, gas prices touched $5/gal. as Costco and other retailers shut down their passenger gas station operations in Southern California.  Gas in the Golden State hit at an average price all time high and one can only wonder how this will impact the nation’s largest economy if this situation continues.

Earning reports season is upon us again and this week marks the start of that quarterly pageantry.

Tuesday brings numbers from Alcoa and Yum while Costco checks in on Tuesday and financial giants JP Morgan and Wells Fargo are scheduled to report on Friday.  This quarter’s earnings reports are forecast to be some of the lowest in months with 80% of companies forecasting low expectations and reduced earnings.

For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1.3%, the S&P 500 Index (NYSEARCA:SPY) jumped 1.4%, the Nasdaq 100 (NYSEARCA:QQQ) added 0.6% and the Russell 2000 (NYSEARCA:IWM) tacked on 0.6%.

In addition to the start of earnings season, next week brings the Federal Reserve Beige Book report on Wednesday, weekly jobless claims on Thursday and producer prices indexes along with University of Michigan consumer sentiment on Friday.

How Can I Profit and Best Bets for ETFs

Major US stocks, ETFs and indexes remain at overbought levels and so are subject to short term correction, although we anticipate that prices will move higher as we move into the fourth quarter of 2012.  Strong sectors for last week include:

Global FTSE Greek 20 ETF: (NYSEARCA:GREK) +15.4%

iShares MSCI Italy ETF (NYSEARCA:EWI) +5.8%

iShares Dow Jones US Construction Index (NYSEARCA:ITB) +5.9%.

Bottom line:  Stocks and ETFs rose to recent resistance levels.  A break above current levels would by bullish while  a deteriorating situation in Iran or Europe could derail the ongoing recovery.


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Posted 10-07-2012 2:32 PM by John Nyaradi