ETF Studies Excerpt

•After registering a new closing high the Friday before (P2), last Monday the SPX Index started the week on the back foot (red arrow) and closed the day down 22.21 points or -0.53%. The selling followed through the following day but the bottom of the Cloud offered a measure of stabilization but nonetheless the large cap index had lost another -0.63% by the time the index closed.

•A price reversal took hold on Wednesday morning and the index retook the ground above the Cloud. This gave birth to the newly drawn Schiff Pitchfork (gold P1 through P3) but the following day a reversal (this time to the downside) took hold and by the close of the session all of Wednesday’s gain was ameliorated. That said, the SPX held Cloud support and avoided challenging support at the Lower Parallel of the Schiff Pitchfork (green arrow).

•The SPX started out of the gate at apace during the first hour of trading on Friday and drove the index back to resistance at the Upper Parallel of the Pitchfork and the during the final hour it retreated slightly but was still up +1.09%.

•The nearly flat Schiff Pitchfork has done a good job of delineating last week’s 70 point trading range and has offered up levels of clear short term support (4,120) and resistance (4,190). We would use these “mile markers” in conjunction with both MACD and the Fisher Transform to determine when the consolidation or distribution pattern has run its course. As to the future direction of prices, we remind readers that the “rule of thumb” suggests that 75% of the time prices exit in the direction that they entered the price pattern.

To subscribe to the weekly Suite of three ETF Studies that includes the US Index and Sector ETF Study, the Developed Markets County ETF Study and the Emerging Markets Country ETF Study, that tracks the technical condition of 74 individual ETFs as well as the SPX, URTH and EEM visit my web site at…

www.themarketscompass.com