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The charts and comments in my Blog (posted in Eastern Time) represent my technical analysis and observations of a variety of markets...
*World Indices *U.S. Indices *Futures *U.S. Equities & Sectors *ETFs *Commodities *Forex
...an expanded version of the "Observations" section in my private Daily Trading Journal.

*** N.B. to my readers: Although I stopped trading in July 2013, I still take a peek at the markets now and then and post the occasional article here on my Blog.
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EVENTS

Earnings Calendar: Courtesy of Yahoo! Finance
Fed's POMO Schedule: at this link

Wednesday, 12 December 2012

The Fed Stimulus Program "Canaries-in-the-Coal-Mine"

The Fed's new monetary stimulus program announced today (Wednesday) is geared towards shoring up the housing/mortgage market which, they hope, will, in turn, stimulate consumer/corporate/investor confidence and job growth. This has been their intent since they began a variety of monetary stimulus programs in 2008.

In this regard, it may be prudent to monitor the relationship between the financial markets and the SPX, and the housing markets and the SPX, in order to (generally) gauge the strength of market faith in the viability of such an outcome as we go forward over the next year. No doubt, these markets may produce short-term volatile reactions to various economic data points as they are released during this period. What will be of interest is whether any one particular release affects the general trend in such a way as to produce a reversal.

As such, I present the following two Daily ratio charts of the XLF:SPX (Financials ETF) and the XHB:SPX (Homebuilders ETF). At the moment, both the XLF and XHB Sectors are trading weaker compared to the SPX. The RSI Indicator has been in decline since September of this year. The XHB is relatively weaker compared to the SPX than is the XLF. In the near term, a drop and hold below current support on XHB:SPX, together with a failure to regain and hold above current resistance on XLF:SPX, may lead to a pull back in both of these Sectors. Furthermore, a drop and hold below the 50 sma (which serves as a support level on the general uptrend) may signal a trend reversal for both Sectors, which could send price down to the 200 sma...ones to watch over the next weeks and months.

***N.B. See UPDATE below...


 
***UPDATE Dec. 13/12: I've added a third ratio chart of the Retail Sector compared with the SPX (RTH:SPX). There has been comparative weakness in the Retail sector during December. Whether this continues through to the end of the month and into next year remains to be seen, but is worth keeping an eye on, along with the other two mentioned above.