David Chojnacki S1F Market Technician
The Market opened the week flat, but quickly began to move to the downside. All three major indices moved to their lows by late morning. The remainder of the session was a narrow sideways trade which lasted into the final bell. The Nasdaq100 fared slightly better than the other two indices propped up by AAPL, which gained nearly 5% on the day. At the close, the DJIA was off 49.7 points, the S&P lost 8 points, and the Nasdaq100 slipped 5.3 points. Breadth was negative, 1.35 to 1, on below average volume. RSI's moved down in the session and are now below over-bought levels. ROC(10's) remain positive, but declined in the session. The S&P and DJIA, despite the recent gains remain with their 20D-SMA below their 50D-SMA. The S&P tested the 1700 level, trading as low as 1697 in the session, but closed at 1701. The Nasdaq100 traded near the 3200 level but closed comfortably above at 3219. This was below the formidable support level of 3225. After last week's highs, the S&P and DJIA are now down for three straight trading days. The VIX spiked up 9% to close at 14.31. We have noted recently that the VIX seemed at relatively low levels considering global and upcoming events. The VIX has been accurate in that we have remained on an uptrend at these low levels. The S&P near term support is now at 1700 and 1688. Upside resistance is now at 1712 and 1725. The Nasdaq100 now has near term support at 3212 and 3200. Near term resistance sets up at 3225 and 3237. The Nikkei was off slightly overnight and Europe up slightly in early trade. Fiscal policies, Fed speak and global events remain on the minds of investors. Futures are mixed versus fair value in the pre-market trade.
Major Economic Reports Today
Case-Shiller 20 city- 9:00am FHFA Housing Index-9:00am Consumer Confidence10:00am
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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.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.