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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Tuesday, December 16, 2014

Update on Fed Monetary Stimulus "Canaries"

I last wrote about the Fed Monetary Stimulus Program "Canaries" in my post of February 6, 2013. As a reminder, I chose six of of them (ETFs) in order to determine their relative strength/weakness against their respective Stock Market Index, since they may have held clues for further accumulation of riskier assets due to respective Central Bank stimulus programs.

So that we can compare their current relative strength/weakness, I've provided the following 3-Year Daily ratio charts for each "Canary."

XLF:SPX ~ U.S. Financials ETF has, basically, traded lock-step with the SPX since my last post. A recent breakout has brought price back to re-test this breakout level. We'll need to see 0.0120 held if XLF is going to resume an outperformance of the SPX.

EUFN:STOX50 ~ European Financials ETF has, after outperforming the European Index until March of this year, dramatically underperformed and has fallen back to the same levels that were made at the time of my last post. We'll need to see price reclaim and hold above the falling 200 moving average, currently at 0.0081. Price action is under the bearish influences of a moving average Death Cross formation, so we may see an increase in volatility on any re-test of the 200 moving average and either a decisive trend reversal or trend continuation established.

GXC:SSEC ~ Chinese Financials ETF has experienced a roller-coaster ride against the Shanghai Index and has drastically underperformed since the highs in July of this year. Price is approaching a 3-year support level...a drop and hold below 0.025 could send a shockwave through China's banking sector.

XHB:SPX ~ Homebuilders ETF has underperformed the SPX since May of 2013, but has bounced since its lows in October of this year to re-test the 200 moving average. Price is still under the bearish influence of a moving average Death Cross formation...any sustainable reversal of this formation will need to be confirmed by a Golden Cross formation...a break and hold above 0.0170 will be necessary in this regard.

RTH:SPX ~ Retail ETF has outperformed the SPX since August of this year. A drop and hold below near-term support of 0.0340 could see a reversal of this trend, or a re-test of the 50 moving average.

EEM:SPX ~ Emerging Markets ETF has drastically underperformed the SPX, essentially since January of 2013. EEM may be monitored more closely against the USD, as more fully explained in my last post at this link, in addition to monitoring the ratio below. Once again, we see another bearish moving average Death Cross formation on this chart...price would need to reclaim and hold above the major resistance level of 0.023 in order to, potentially, claim a sustainable outperformance of the SPX.


China's Financial ETF and the Emerging Markets ETF are drastic underperformers, while the Retail ETF has been a major outperformer, as compared with their respective Indices. U.S. Homebuilders, and European Financials have been slack, and U.S. Financials will need to hold above major support to demonstrate sustainable strength. In fact, China's Banking Sector could be sent plunging if its current price level is not held, as I mentioned above.