The State of ETFs – March 6, 2011 – The Week Ahead

As of the close of Friday, March 4, 2011, there are only 3 changes in the ETF trend state table in relation to previous Friday’s close. There are no overbought or oversold conditions present:   

 

ETF Short-term Medium-term Longer-term OB/OS
SPY SW UP UP    
QQQQ SW UP UP  
GLD UP UP+ UP  
FXE UP SW UP  
TLT SW- SW+ DN  
USO UP UP UP  
DBC UP UP UP  

SW” indicates no trend, ”+” indicates a new upward trend change,   “-” indicates a new downward trend change, “OB” means overbought and “OS” means oversold. “OB-” means close to becoming overbought and “OS+” means close to becoming oversold.                

Summary of the trend changes: The medium-term trend of GLD is now up in addition to the short and longer-term trends and the short and medium-term movement of TLT is now sideways.

As already mentioned, there are no overbough or oversold conditions. It appears that the technical picture is dull at this point and will be overshadowed by geopolitical developments in the following week and maybe longer than that. Volatility in stock indices has started increasing but there are no conclusive signs at this point of an imminent trend reversal.  

The p-Indicator results for QQQQ indicate a short-term reversal across-the-board in terms of the profit target/stop-loss pairs used. A negative bias was calculated for all four pairs of 1%/1%, 2%/2%, 5%/5% and 7%/7%. The probability of a correction is the short success rate of the p-Indicator, P-short, shown on the screenshot of the results as of the close of 03/04/2011 below. This is the probability that a short position initiated at the open of Monday will result in a profit for corresponding profit target and stop-loss values. However, the significance S is equal to 2 for the first three pairs and equal to 1 for the last pair. This level of significance is very low but the fact that all four pairs produce a large negative bias P-delta should be taken into account.

The only divergence between the RSI and the MEI is in TLT, where the MEI is falling while the RSI is rising very short-term (see chart below). However, even that is not conclusive because the RSI is at 51.20, a value far from critical levels. It may be an indication though that TLT will continue falling despite Friday’s gains.

Click on image to enlarge

Have a good trading week!                         

The above analysis was based on 3 different methodologies:                                  

  • Technical Analysis – (mainly trend lines, moving averages and overbought/oversold indicators)
  • P-indicator calculations - (short/medium/longer-term correspond to small/medium/large  target and stop values)
  • MEI Indicator readings - This is a new technical analysis indicator for measuring trend/momentum/oversold/overbought conditions

Chart Source: Amibroker (Charts created with AmiBroker – advanced charting and technical analysis software. http://www.amibroker.com/”)   

Disclaimer: The author is not a financial advisor and does not recommend the purchase of any security or advise on the suitability of any trade or investment in any timeframe. ETF, stock, futures, forex and options trading and investing involves substantial financial risks and can result in total loss of capital. If investment or other professional advice is required, a licensed professional should be consulted.

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