We are likely looking at a holiday week in the markets, albeit one with a lot of news. The upcoming July Fourth holiday puts the employment report on the calendar one day earlier. Having gone through all the indicator and stock and index charts this weekend, I will say I still expect the market to have some sort of correction in July.
However, the charts that really caught my eye this weekend are not stock charts but currency charts. Perhaps I haven't been paying close enough attention, but I do not see a big fuss being made over these charts.
We have looked at dollar/yen many times, using the ETF CurrencyShares Japanese Yen Trust (FXY) - Get Free Report, which is the inverse (yen/dollar). For the longest time, I expected it to break out. But I was disappointed so often that, about two months ago, I figured it was just in a trading range. Yet I stared at this chart over the weekend and all I could think of was, "If this was a stock chart, we would call that a base."
FXY has moved up quite a bit already in the last week, so perhaps the breakout is not imminent for the first week of July. By that I mean that it seems more likely that it will rally to that $96.50 area and either back off or consolidates one more time before eventually pushing through. Who knows? Perhaps that is the catalyst for a correction in the stock market later in the month?
The reason I say this is because to the best of my knowledge a move up and out of this range, one that has been in place for six months now, would be a market disruptor.
Even if we look at the chart of CurrencyShares Euro Trust (FXE) - Get Free Report, an ETF to be long the euro vs. the dollar, we also see a weakening dollar. It would not be a breakout until it got above $135. And let's not kids ourselves, the resistance at $135 is tremendous. Here, again, the move over the past two weeks has been steady to the upside, so it's possible the push above $135 will not arrive this week. Yet, if this were a stock, we would have to say it looks like it is trying to bottom.
You might recall a few weeks ago we looked at CurrencyShares Australian Dollar Trust (FXA) - Get Free Report, which is an ETF to be long the Australian Dollar. I was bullish on this chart. Keeping in mind that currencies do not move like stocks, note that the next measured target on FXA is near $96, although $94.50 is currently the next resistance.
I cannot say that the timing of these moves looks as though it will arrive in the next few days or even the next week, but these are the charts I'm focused on this summer, especially since, as of this writing, most stocks folks are not.
I was asked to follow up on Freeport-MacMoRan (FCX) - Get Free Report, a chart I liked a few months ago. It hasn't done very much. Oh, I suppose creeping up 10% in two and a half months is good, but when you look at the chart, it still looks rather stuck. The resistance at $37 is formidable, but, on a longer-term basis, I do expect it will push through there. I suspect it will fail at $37 on the first visit up to that level and then it will get through it later this summer. But that may be in keeping with the big head- and-shoulders bottom we have looked at in the gold stocks as well.
When you consider the currency charts above and the longer- term chart of gold and gold stocks that we looked at a few weeks ago, it makes sense that over the next several months, we should expect some sort of movement in these various assets.
The Hi-Lo Indicator is heading up. However, unless the number of stocks making new highs improves dramatically in the next few days, it ought to turn back down by midweek.
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I was asked to look at MasterCard (MA) - Get Free Report on a six- to-12-month time frame. We last checked in on this a few weeks ago and, at the time, I noted that if MA could bounce off $72-ish, we could see a head-and-shoulders bottom form - - with this decline being the right shoulder of a head-and- shoulders bottom. You can see the downtrend line is here as well.
In another market environment, we would call this a top because it has had a series of lower highs and lower lows. In addition, if we look at the three-year chart on a weekly basis, we see a top forming as the long-term uptrend line was broken. Therefore, I am of the mind that if the bounce off this area is without any vigor, I would be concerned because a break of the head area measures down to $60. Any rally that cannot move the stock above $78-$80 should be concerning.
I was also asked to look at Boeing (BA) - Get Free Report on a six-to-12-month basis. Here we see a stock bouncing off an uptrend line. For that reason, I would be inclined to think the stock rallies in the near term. The good news is that there is not a series of lower lows on the chart. The most important aspect of the chart is that it does not break that line.
When we check in on the longer-term weekly chart, we can see a top appears to be forming. These past two weeks have caused a kissing of that uptrend line (depends how thick your pencil is!). So once again, any move below $125 would and you break that shorter-term uptrend line and this longer-term one.
In both cases, I suspect we need a very strong market in big-cap stocks for these two charts (BA and MA) to make new highs. Without a decent correction first, I cannot envision a very strong next few months.
I was asked to review the chart of Direxion Daily Small Cap Bear 3X Shares (TZA) - Get Free Report, an ETF -- a triple! -- to be short the Russell 2000. Rather than review that particular ETF, especially since I do not like double and triple ETFs, let's look at iShares Russell 2000 (IWM), an ETF to be long the Russell 2000.
You might recall I drew in this particular line about two weeks ago; it comes in around $118-$119 and we still have not breached it. If you opt to be short, then the stop is a move above $119. Oh, sure, there is resistance all the way to $120 but once you get a decisive move above $119, you have broken out of the downtrend that has been in place since March.