Today's Technical Outlook - 7/22/2013

Market Summary

David Chojnacki S1F Market Technician

After a week of continuing the move to the upside, the indices opened to the downside on Friday. There was some buying during the day, which brought the averages off their lows. The Nasdaq100 was the weakest of the averages, and also was the only one of the three major indices that finished the week in the red. At the close on Friday, the DJIA lost 4.8 points, the S&P added 2.7 points, and the Nasdaq100 losing 1%. Breadth was slightly positive, on above average volume. The increased volume most likely options related. For the week, the DJIA added .8%, the S&P rising .7%, and the Nasdaq100 losing 1.1%. The S&P was the only major index to close at a new high on Friday, despite only gaining 2.7 points. Small caps(IWM) and Financials(XLF) also made new closing highs. The Tech sector, however, was much weaker with earnings in big names like IBM, MSFT, INTC disappointing the Street. This was the catalyst for the Nasdaq100 having a losing week. RSI's remain in the 60's for the three major indices, with the Nasdaq100 the weakest. Technicals continue bullish, but the weakness in Techs is a reason for caution. The VIX closed at 12.54, its lowest level since the middle of May. The low levels suggest that there is little downside pressure on the markets.

Trading Trends

David Chojnacki S1F Market Technician

Long term technicals continue to remain positive, as the DJIA and S&P made new highs during the week. Short term technicals remain with a positive bias. The Nasdaq100 had shown some weakness last week, but still remains in an uptrend. We expect this to continue as the S&P makes a move for 1708 and the Nasdaq100 towards the 3107 level. Near term, the DJIA and S&P have now had three straight weeks to the upside. There is room for more upside, however, the momentum has weakened. Economic reports will be light this week, but earnings reports pick up. Overseas markets are mixed in early trade this morning. Futures are up slightly versus fair value.

MAJOR INDICES Short term support and resistance level
DJIA close 15543		SP500 close 1692		N100 close 3044
15500	15548	1692	1693	3037	3050
15409	15589	1687	1700	3025	3053
15325	15600	1675	1708	3012	3075
15250	15721	1662	1712	3000	3085
15183	15750	1650	1725	2988	3088
15166	15800	1640	1737	2979	3090
15125		1639	1750	2976	3100
15000		1637		2975	3112
		1625		2962	3125

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TODAY'S DATE, UNLESS OTHERWISE INDICATED

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ETFs can lead to unexpected results over the long term. As a result, we believe longer-term investors should consider regularly rebalancing positions. 4) Trendless markets, particularly those with a high level of volatility, can lead to substantial relative underperformance of L&LI ETFs. 2) Leveraged and Leveraged Inverse (L&LI) ETFs typically utilize futures and equity swap agreements. The use of these derivative instruments increases risk and enhances the possibility of tracking error.

Relative to traditional ETFs, leveraged, inverse and leveraged inverse ETFs typically have higher costs and lower tax efficiency. 3) The effects of compounding can lead to significant deviations from traditional benchmarks over longer time periods. For example, if $100,000 is invested in an index that increases in value by 10% on day one and then decreases in value by 10% on day two, the investment will be worth $110,000 at the end of day one and $99,000 after day two. However, the value of a security that doubles the daily performance of the index would be worth $120,000 on day one and $96,000 after day two. Thus, the index is down 1% after two days, a doubling of which would be down 2%. However, the security attempting to double the return of the index is down 4%. Investors should consider carefully the potential impact over longer periods. MLP and MLP ETF Risks Individual MLPs are publicly traded partnerships that have unique risks related to their structure. These include, but are not limited to, their reliance on the capital markets to fund growth, adverse ruling on the current tax treatment of distributions (typically mostly tax deferred), and commodity volume risk.

For tax purposes, MLP ETFs are taxed as C corporations and will be obligated to pay federal and state corporate income taxes on their taxable income, unlike traditional ETFs, which are structured as registered investment companies. These ETFs are likely to exhibit tracking error relative to their index as a result of accounting for deferred tax assets or liabilities (see funds' prospectuses). The potential tax benefits from investing in MLPs depend on their being treated as partnerships for federal income tax purposes and, if the MLP is deemed to be a corporation, then its income would be subject to federal taxation at the entity level, reducing the amount of cash available for distribution to the fund which could result in a reduction of the fund's value. MLP funds accrue deferred income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred return of capital and for any net operating gains as well as capital appreciation of its investments; this deferred tax liability is reflected in the daily NAV; and, as a result, the MLP fund's after-tax performance could differ significantly from the underlying assets even if the pre-tax performance is closely tracked. Commodity ETF Risks Commodity ETFs may be subject to greater volatility than traditional ETFs and can be affected by increased volatility of commodities prices or indexes as well as changes in supply-and-demand relationships, interest rates, monetary and other governmental policies, or factors affecting a particular sector or commodity. Currency ETF Risks Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. ETFs mentioned at times may have material exposure to small cap and/or international securities that may have higher levels of risk and volatility than other ETFs.

Major Economic Reports Today

Existing Home Sales-10:00am

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.