Market Update as of Week Ending 21 August 2015AKA -- What The &*^% Happened This Week?

US equity markets gave up multiple percentage points this week...

It looks “bad” (to bulls anyway) but don’t go getting all emotional just yet. This week’s action doesn’t mean the monster, multiyear uptrend in equity markets is done. What follows is a look at select equity and related charts from the 10,000 foot level… also known as the weekly and quarterly timeframes. As you’ll see, the recent price action in stock indices is, for the most part, a blip… for now.With these kinds of trends, I would much rather look to buy support (on a new breakout to the upside), than try to catch a big move down… for now.

SPY W

SPYThe SPY broke multiple weekly support levels…including that denoted by the horizontal line. Price finally came to rest at a support level extending back to the end of 2014/beginning of 2015. As you’ll see on the quarterly chart that follows, this move barely registers on the longer term picture. Major support is all the way back around $158. I would need price back above the weekly TVZ before becoming positive again.

SPY Q

DIA W

DIAThe DJIA dropped 1,000 points and looks to have gotten it worse than SPY due, in part, to being comprised of only 30 stocks. The index broke several levels of weekly support including the lows of the congestion at the end of 2014/beginning of 2015 along with TAOST Value Zone (TVZ). The next level of support is around $158 which aligns with that shown on the quarterly chart below. There is additional support at $147 and major support lives at $142 although if price gets to these lower levels the strength of the trend will be in serious doubt if not obliterated altogether.

DIA Q

QQQ W

QQQThe tech sector as represented by the Qs suffered along with the the overall market. Price held above at weekly support ($100) and stopped right at the bottom of the weekly TVZ. While it’s hard to identify support on the quarterly chart given the parabolic nature of the move, $90 and $83 look like consecutive areas of support. Interestingly, price is finally within shouting distance of the all time high from March 2000 ($120.50).

QQQ Q

MDY W

MDY

MDY is the S&P Midcap ETF. It’s also my favorite index as midcaps are in the sweet spot in terms of real companies with tremendous growth potential. The ETF closed just below the weekly TVZ, but still above support at $252. There is additional support at $230 and way down at $185.00 and $169.

MDY Q

FXI W

FXII thought it might be good to have a look at an ETF that represents what’s been called the origin of all this market mishegas… China. During a large portion of the runup over the last 6 years China or, more specifically, what was thought to be the endless growth potential of China was the fuel for combustion. We’re now seeing the other side. Support around $28 and $19. Below that? Trouble.

FXI Q

JNK W

JNKIn a strong market you’ll generally see high and rising interest in High Yield corporate securities (aka “junk bonds”) as investors feel more comfortable about the capacity of overall growth to help companies service the debt load. A nervous market gives you just the opposite. Here, the weekly looks nasty, but on the next slide, the quarterly shows that price is only approaching the bottom of a channel extending back to 2010.

JNK Q

GLD W

GLDI’ve been negative (and right) on the price of GLD since early 2013 during that time there have been several strong bounces, but none that reversed the trend. There’s no reason to expect any different here… except maybe that we have now retraced a bit more than half of the move up that began in 2005. Could go either way here… watch $117.50 in the coming weeks… if price can clear that and hold, there’s a shot that a reversal will take root.

GLD Q

USO W

USOThere is a good long trade coming in oil at some point. It’s a cyclical commodity and we are working through a global glut at the moment. Trader/analyst (and long time oil bear) Dennis Gartman feels like the bottom is in and took a shot on the long side on Friday. I’ve been saying since January of this year that weekly long setups should be taken (and I made 2 calls to that effect here and here). I see no reason to change that opinion.

USO Q

VIX W

VIXI have never thought the Volatility Index a great indicator for traders (the mere presence of volatility is not negative), but traders continue to watch it and use it, so when in Paris… The Vix spiked last week (almost 50% on Friday alone) but it did so off of ongoing historic lows. Some are suggesting this spike is going to turn the overall market lower. That may be (it looks similar to 2007), but it could also be a great buying opportunity.

VIX Q

EUR/USD W

EUR/USDThe Euro caught a bid recently due in part to the craziness in other, more tertiary currencies. Pattern wise, it looks like what I call a Dead Man’s Drift. Price makes a hard push down then begins to drift higher forming what looks like a wedge. The pattern is confirmed when price breaks back down through the rising trendline along its bottom. The quarterly shows that price could drift as high as 1.20 and still maintain its integrity.

EUR/USD Q

TNX-X W

TNX-XUsed by traders to gauge the level of interest rates, the TNX-X loosely reflects the current rate for the 10 year, but the direction is more important and telling. With a likely September rate hike by the Fed, one would think that rates would be trending strongly higher. Last week suggests otherwise. Likewise the quarterly tells us that the rate needs to get and remain above 3% ($30) before the back of this long downtrend is broken.

TNX-X Q

% Stocks Above 200 Moving Avg W

% Stocks Above 200 Moving Avg

Finally, a look at another trader favorite. The 200 Day Moving Average is watched on virtually every stock by traders, thus making it important. At only 25.5% (and looking set to go lower), things don’t look good for bulls.

% Stocks Above 200 Moving Avg Q

A Couple Of Fan Favorites

BBH W

BBHThe Biotech Sector has been in a love affair with the investing public for several years now. While the ETF’s price has pulled back along with the broader market, it hasn’t suffered nearly as much… in fact, this looks a lot like a buying opportunity. Support at $122.87, $119.76 and $113.87.

BBH Q

GOOGL W

GOOGLPrice is powerfully structured to the upside on GOOGL on both the Weekly and Quarterly timeframes. In fact, the quarterly shows the stock having just broken out of a Bull Flag. To the downside, there’s good support at the $614.50, $609 and $585 levels.

GOOGL Q

AAPL W

AAPLAAPL is the favorite whipping target of the market du jour… just as it was a darling on the way up… $104.63, $100.75 and $97.79 are good support levels.

AAPL Q

ConclusionThe talking heads will be lamenting and wringing their hands this weekend… “the end is nigh” they’ll say. Maybe… but this could also be setting up a great buying opportunity. Either way, don’t try to predict… stick to your strategy and trade your setups. The result will take care of itself.KIS,The Trader