Assessing through Technical Analysis My View of the Financial Markets

Tom Gentile

Posted in
Big Picture

By: Tom Gentile
June 21st, 2024

6 mins read
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My research in assessing a directional bias for the markets overall starts with a look at the charts on what I call my ‘Corners’ of the market.

I look at the following 5 corners or area of the market.

  1. Stocks / equities, represented by SPY: SPDR S&P 500 ETF Trust.
    • This ETF tracks the S&P 500n Index
  2. Bonds represented by TLT: iShares 20+ Year Treasury Bond ETF. 
    • This ETF tracks a market-weighted index of debt issued by the US Treasury with remaining maturities of 20 years or more.
  3. Currency represented by UUP:  
    • This ETF/fund tracks the changes in value of the US dollar relative to a basket of world currencies via USDX future contracts.
  4. Commodities Oil, represented by USO: 
    • An ETF that attempts to track the price of West Texas Intermediate Light Sweet Crude Oil.
  5. Commodities Gold – represented by GLD: 
    • It is one of the largest gold ETFs and tracks the price of gold bullion.
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Once I go through these charts I assess whether I am bullish, bearish, or neutral on each.

If I deem a chart bullish I give my assessment a +1 if it is bearish I give it a -1 and if I am neutral I give it a 0. If two are bullish, one is bearish and the other two are neutral, a final group assessment is +1 and therefor I lean towards a bullish market bias.

More importantly I look to the corners individually and if I see bullishness in equities I try and find bullish option patterns and then bullish option strategies in that corner. But I am also inclined to trade bearish patterns with bearish options strategies when a corner of the market seems weak, technically.

With all this said, I will run through my corners of the market today and provide you with my outlook for them all right now as of Friday, June 14, 2024.

SPY

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The Fed’s decision to leave rates unchanged was expected and did nothing to propel or drop the SPY.

Even after Chairman Powell spoke and said there is likely only going to be one rate cut this year the market shrugged that off as well and continued to trade near its all-time highs.

The inflation reports, CCI and PPI, were reported this week and both came in a bit lower than expected, which was the catalyst for the gap up in the equities markets, Dow, NASDAQ and S&P500.

The Fed decision and commentary did knock prices back, but I wouldn’t be surprised if the SPY fills its gap.

What it needs to do should that happen is hold that price level and if it does further upward pricing may occur.

TLT

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One can look at the basing pattern on TLT and say it looks like a cup and handle pattern, where the right side of the support has a higher pivot low (just under 89) than its price base low (just under 88).

Take the horizontal resistance area of 95 and that can be looked at as the upper part of the cup.

In technical analysis if the resistance level gets taken out on above average volume and holds that price one can anticipate a move equal to the range difference from support to resistance of the cup and handle.

That price amount is a bit over 7-points. To keep things simple, I would use 7-points as my price move expectations should that happen. That could make for a target price where TLT hits 102 eventually.

This would be a great move for TLT bulls as they have been in a multi-year slump where prices have done nothing but slide that entire time.

The slightly cooler than expected inflation numbers helped TLT find some positive price action and even though the forecast from the Fed is only one rate cut this year, it seems Bond bulls are at least putting their toe back in the water so to speak and putting some money to work in TLT.

UUP

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From a technical viewpoint UUP broke out today.

I would feel more confident in it being a true breakout had the day closed higher than it opened on the day showing a bullish candle vs bearish.

The gap up from its prior day close and the fact it is trading above the price makes this a bullish move from the close price from yesterday to today standpoint.

If this closing price holds and prices go higher I would assess an expected price move higher equal to the distance of the sideways range between support and resistance of 29 resistance and 28.50 support, or $0.50.

Recognize that is only $0.50, which may be a big move comparatively speaking for UUP itself, but not that big an options trader can make much money with that on say ‘long call’s’.

I don’t usually trade options on UUP because of the small price amount moves, but I do use it to gauge if there is money flowing into this ETF or out.

Usually, not always, when the dollar is strong and UUP is moving higher that comes at equities seeing pricing pressure and a bit of a pullback.

I also want to point out even though this seems like a breakout for today, one has to be cautious of a false breakout where UU in this case could fall back in to its sideways trading range.

USO

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GLD

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My annotation says if GLD basically says if it wants to maintain its bullish outlook from a technical view it needs to hold support (that I have drawn in above).

That doesn’t mean if it breaks support it is going in to full scale bearish mode.

GLD can drift back and maybe find a Fibonacci retracement level of its up leg from the low of the chart above at 185 to the peak at 225 which then becomes a support area it launches itself higher from for the rest of the year.

My view is just in the short term the horizontal line drawn in at 211-21 is where I see current support.

The good folks at monex.com write that they expect these price levels to hold through the summer so long as nothing political nor any adverse economic news comes out to cause it to tumble.

It is deemed that a breakout of the current price area will be a challenge; at least until September in their view, and they say it may slide back a bit (which I alluded to already), but they do seem positive gold will get back to its bullish ways and possible trade higher over the last 4 months of the year.

They see a possibility of new highs by the year’s end. That’s all well and good, heck I’d be happy to get a move back to the previously established high at $225.

Tom Gentile
C1P: Chief 1-Percenter

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