The sell-off today saw the S&P 500 test the support zone in the 2130 to 2015 range on the daily chart. It was able to manage a small recovery in the final 90 minutes of trading, but it was minimal relative to its overall range.
The Russell 2000 took out its 50 day moving average, now the NASDAQ Composite is the only major market index still above its 50 dma, but it closed right on it.
The PowerShares DB US Dollar Index Bullish Fund (UUP) spent August and September consolidating above the support line of the large triangle pattern it has been trading in on the weekly chart. This month it has started to move higher and looks like it wants to retest the triangle downtrend line. A break above that resistance could power the buck substantially higher.
Interest rates are edging higher and the ProShares UltraShort 20+ Year Treasury (TBT) ETF has been trading above a downtrend line drawn off the highs since June last year.
The iShares High Yield Corporate Bond Fund (HYG) broke above an intermediate term downtrend line and made a modest new higher high.
The ProShares UltraShort 20+ Year Treasury (TBT) fund has continued higher since breaking above the rim line of a cup and handle pattern that formed this year, and now the 50 day moving average crossed above the 200 day average.
It looks like an inverse head and shoulders pattern formed on the 10 Year Treasury Note Yield weekly chart. This is a fairly reliable bottoming formation. If nothing else, the second in a series of higher lows was made this week and the long term downtrend line drawn off the 2014 highs was broken. Bonds have been volatile and there could be a reflexive reaction next week, but it certainly it looks like an intermediate term bottom has been made in yield.
The TBT is on my “best ideas” list on RealMoneyPro.com
Biotech iShares (IBB) are bumping up against channel resistance.
I have been following the price action of LinkedIn (LNKD) closely over the last several months (please search on the home page). In particular, the clusters of high wick candles that appeared in April and March, and the confluence of Fibonacci time and retracement lines that occurred last month.
High wick or long upper shadow candles reflect an inability to hold new highs and are often a precursor to pullbacks. A significant decline in the stock price occurred at the beginning of May, and in the month that has followed there has been a concerted effort to base above Fibonacci support.
Yesterday, LinkedIn was up 3% and would have closed higher, if not for the drag of the late day broader market sell-off. I’m looking at another close in upper candle range above the $199.00 level as a good risk/reward entry point, with an initial stop below Fibonacci support.
The ProShares UltraShort 20+ Year Treasury (TBT) fund is testing the rim line of a cup and handle formation that formed on the weekly chart over the last seven months. A successful break projects a pattern price target into the $57.50 to $58.50 area, which is the former bottom end of a consolidation channel that formed in 2012 and 2013. In May of 2013, the fund bounced off channel support and continued higher, breaking above the channel top and rallying to a perfect pattern price projection. The current technical status of the TBT is very similar to the one in 2013 before the rally: price is breaking or preparing to break out of a consolidation pattern, and volume and money are improving. Remember, however, that this week’s candle has three more days left to mature.
There is a consensus building that bond yields may be forming a bottom and are headed higher over the intermediate to long term. The weekly chart of the ProShares UltraShort 20+ Year Treasury (TBT) shows the ETF breaking above an 18 month downtrend line, its 40 week (200 day) moving average, and the rim line of a cup and handle pattern that has been forming since the beginning of this year. Both the Relative Strength Index and the Money flow Index are tracking above their centerlines, reflecting price and money flow momentum. The ETF certainly looks like it is attempting to transition out of its current downtrend to a more neutral condition, and this process is likely to see some horizontal movement and require some time.
The market is coming to terms with the increasing possibility of interest rates moving higher sooner, rather than later. The weekly chart of the iShares Barclays 20+ Treasury Bond Fund (TLT) shows the recent formation of a series of wide-range dark candles, that broke a six month uptrend line and returned it to its 2012 high. The ProShares Ultra-Short 20+ Treasury (TBT) fund, in inverse correlation to the TLT, is breaking above a one year downtrend line. This bottoming process in the TBT can be seen as a cup and handle pattern, with today’s gap higher breaking above the $45.50 rim line. There has been strong positive money flow over the last month, reflecting accumulation.
In a CNBC interview this afternoon, Bill Gross suggested TIPS as an investment idea. The weekly chart of the iShares Barclays TIPS Bond Fund (TIPS) shows the 10 week (50 day) moving average crossing above the 40 week (200 day) moving average earlier in the year, and the fund price rising up through the Fibonacci retracement levels measured off the 2013 range. They pulled back at the 62% level in August and have returned to twice test the 38% retracement level. The downtrend line drawn off the highs since August and the 38% reistance-turned-support level have formed a triangle pattern on the weekly chart. A break above pattern resistance projects to the $117.00 area.