After a tough week of red ink, U.S. ETFs and stocks face the fiscal cliff, a bear market in Apple computer, Europe, a divided government and significant technical weakness.
A volatile week led to modest recovery for stocks and ETFs on Friday, heading into the holiday weekend, as investors digested the post-election landscape.
On My ETF Radar
In the chart of the S&P 500 below (NYSEARCA:SPY) we can get a clear picture of the outcome of recent stock market action.
The S&P 500 (NYSEARCA:SPY) is on a sell signal and has reached its downside price objective of 1380 which is now likely to be revised lower. Major support levels are at the green horizontal lines near 1260, 1320 and 1360. A break below 1260 would clear a path to 1160 on the S&P 500 (NYSEARCA:SPY)
But the big news this week was the bearish breakdown of the index below the blue bullish support line. This type of action doesn’t happen very often and is similar to the break of the 200 day moving average in conventional charting. These blue and red lines tend to act as walls, and once penetrated, open the door to further moves which, in the current situation, would be down.
chart courtesy of StockCharts.com
The Dow Jones Industrial Average ETF (NYSEARCA:DIA), S&P 500 ETF (NYSEARCA:SPY) Nasdaq 100 ETF (NYSEARCA:QQQ) and Russell 2000 ETF (NYSEARCA:IWM) all closed below their respective 200 day moving averages this week and so the technical picture is bleak across the board.
Another red flag for U.S. markets is the bear market in Apple Computer(NASDAQ:AAPL) and its effect on the technology sector and Nasdaq Composite. (NASDAQ:QQQ) Apple (NASDAQ:AAPL) is the world’s largest company and has been in a nose dive since reaching a closing high of $702 on September 19th. Since then it has fallen to close at $547 on Friday, a drop of 22% and placing the stock well below its 50 and 200 day moving averages and possibly creating an “Eiffel Tower” pattern. Beware Of Falling Apples
ETF News You Can Really Use
Now that the election is over, investors are coming to grips with the fact that the same players who brought us the fiscal cliff problem are now gathering at the White House next Friday in round two of attempting to resolve their differences. We all know markets don’t like uncertainty and the only thing that seems certain is that the two sides are likely to disagree, at least at the outset. How To Dodge The Fiscal Cliff
The last time they went through this drill in the summer of 2011, the S&P 500 (NYSEARCA:SPY) fell nearly 17% between July 22nd and August 19th and so it’s no wonder as markets are getting nervous and wondering if this will be “deja vu all over again” in Yogi Berra’s immortal words.