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Price on the High-Yield Corporate Bonds ETF (HYG) has weakened further since my late-January post.
It’s now trading in between major resistance and support levels of 86.00 and 83.00, respectively, as shown on the following weekly comparison chart of HYG and the Russell 2000 Index (RUT). Volumes spiked to record highs on last week’s decline and the momentum indicator has fallen below the zero level, hinting of further weakness ahead on this timeframe.
As mentioned in my 2018 Market Forecast, I think that volatility will remain elevated for much of 2018 (although to what extent will, no doubt, vary) in this evolving environment where Central Bankers are tightening monetary stimulus measures they deployed after the 2008/09 financial crisis.
As I posted in early February, near-term major support on the SPX lies somewhere in between 2525 and 2485. The upper edge of that zone was almost hit on Friday as it reached 2532, before snapping back to close the day higher.
The following daily comparison chart shows that 10-YR rates have held near their recent highs during the recent correction of the SPX. Whether rates continue to hold or push higher on any recovery in equities, and whether that may materially impact the extent of such a recovery, remains to be seen. As long as 10-YRT remains above, firstly, 2.67% and, ultimately, 2.5%, then equities will remain vulnerable to more wild swings and weakness. (more…)
The following daily ratio charts show the performance of three Financial ETFs with their respective country/union’s Major Index, namely, XLF:SPX, EUFN:STOX50, and GXC:SSEC.
Each of them has weakened compared with their counterpart index during the volatility spike that occurred in world markets over the past couple of weeks. These ratios had either reached or broken above some sort of resistance level and are now above near-term support.
If we see the RSI decline below the 50.00 level, this could be a warning signal that their indices may weaken more than is currently anticipated. (more…)
The following monthly chart of the Emerging Markets ETF (EEM) shows that price has dropped below major resistance around the 50.00 level, after rallying towards its all-time high of 55.82. Near-term support is at 45.00, while major support lies below at 40.00 (the apex of a converging trendline and channel), or lower at 35.00 (historical price support).
Whether or not its current price represents fair value on this longer timeframe remains to be seen. The fact that January’s gap up has now been filled may be a warning that lower prices are ahead, before this ETF begins to stabilize and present more of a viable buying opportunity.
After another volatile day of trading on Thursday, all of the nine US Major Indices closed down hard and four are officially now in 10% correction territory (with the others closely behind), as shown on the following graph, which shows their losses since prices peaked in January.
Here’s a look at their 6-month daily chart. All of them are below their 50-day moving average.
