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The Weekly Charts

July 1st, 2012 · No Comments

Turn around?

It will have a primary budget suplus of 3.6pc of GDP this year, and 4.9pc next year, the best in the G7 bloc. Combined public and private debt is 260pc of GDP, similar to Germany and much lower than France, Spain, or the UK. With private wealth of €8.6 trillion, Italians are richer per capita than Germans. [The Telegraph]

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S&P 500 SPDR ETF (ARCA:SPY) is once again pushing at the $136.25 resistance level. A move above $136.25 could spark additional buying interest. The next upside target, if this occurs, is $139.75. This would bring the ETF near the 52-week high of $142.21, but it will be hard for the ETF to climb back above it. Over the longer-term the RSI was showing a bearish divergence, which indicates a trend reversal, and an unlikely rise back through the 52-week high. On the flip side though, the indicator has recovered aggressively and has shown a slight positive divergence at the recent lows. This confirms the current short-term move higher. Minor support is at $130.85, with a drop below likely to result in a test of the low at $127.14 (unadjusted). If that low is breached, the next downside target is at $126, followed by $122 (if we move below $126).

SEE: Momentum And The Relative Strength Index

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The Dow Jones Industrial Average SPDR (ARCA:DIA) remained above the $123.50 support level the entire week, and the jump on June 29 puts it in very close proximity to a resistance level. The trend for June is higher, and if the ETF continues to push through resistance at $128.71 (June 19 high) the rally is likely to continue for at least a bit longer. The 52-week high is at $133.14 and is within striking distance if the resistance level is over-taken. A drop back below $123.75 has bearish implications, and provides further downside targets of $120, followed by $116 if the former is breached. Once again this ETF has shown a longer-term bearish divergence on the RSI, but recently the indicator has recovered and shown a slight positive divergence at recent lows. Therefore, the current short-term rally is confirmed, but there still remains downside risk as the longer-term form forces play out.

SEE:Support & Resistance Basics

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PowerShares QQQ ETF (Nasdaq:QQQ), representing the Nasdaq 100 index, remains in between resistance at $64.57 (June 20 high) and support at $61.54. Prior support at $61.68 was broken during the week, but was a false breakout as the ETF recovered on June 28 and 29.  If the ETF can rally above $64.57, the next resistance level (and upside price target) is $66. From the middle of March to the beginning of May, $66 to $68 was a high traffic area. The area is therefore likely to act as resistance. A drop below $61.50 could trigger selling into support. Support is at $60 followed by $59. The $59 mark is important because it was a resistance area back in October and November, and should now support declines. If it does not, it is a longer-term bearish signal. The next target would be at $56, should $59 be breached in the coming week(s). The RSI tells the same story it did with the ETFs discussed prior–a longer-term bearish divergence, but recent indicator strength means we could see further upside before selling continues.

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Russell 2000 iShares Index (ARCA:IWM) ETF, representing the Russell 2000 index, managed to break above the pivotal $78 resistance level on June 19, but then moved back below it. On June 29 the ETF moved back above $78 and also penetrated the recent high at$79.08. This is a positive short-term sign for the ETF. The target for the current move higher is $81.50. A drop back below $74.60 indicates more selling, and that a move below the June 4 low at $72.94 is likely. If that materializes, the next downside target is $71, followed shortly by $70, which is right in the vicinity of the long-term upward trendline going back to 2009. The longer-term bearish divergence on the RSI indicates that $82 to $84 will be strong resistance, and the ETF of has a low probability of being able to get through it in the near-term. Short-term positive RSI confirmation indicates this current rally could go a little further though.

Bottom Line:
Each of the index ETFs is showing short-term positive signs, helped out by the big push higher in early trading Friday, June 29. Being able to push through their respective resistance levels is a short-term positive signal, and the RSI indicator is confirming this could occur. The 52-week highs will still be hard to reach though, which means this rally is more likely a correction higher in what will be a longer-term downtrend. Of course if all the ETFs continue to move higher and break through the 52-week highs, this would change the outlook, and point to another wave higher.

Tags: Technical Analysis