ETF Trends – Week of December 5, 2011

As of Friday, December 2, 2001, there are 10 changes in the ETF trend state table in relation to last week’s report. The short-term trends of all 8 ETFs tracked were affected due to the price action of last week. The medium-term trend of all but one ETF has remained intact for now despite some impressive short-term gains. The next couple of weeks should be interesting because a change in the medium-term trends will require pushing through important support and resistance levels and that may create price swings and add to volatility.

 Last week I wrote:

“It looks like the medium-term trend column will be under a lot of pressure this week for more down entries unless the short-term trend reverses and there is a rebound in index, metals, currencies and commodities, markets that seem to be fairly well correlated for a long time against the US dollar and bonds. “

The rebound occurred and the correlation is still in place. Some people are puzzled because of the persistence of this correlation. Someone asked me the other day: “Why when things appear to get better and stocks rise, gold also rises?”. This is a very interesting question with many possible answers. A quick answer could be something along these lines: “I don’t care why because I am a trader, I just trade price action”.  However, this answer won’t satisfy someone who was taught in school -possibly wrongly- that there are well-defined causal relationships in this world. Along these lines I cannot offer much other than to repeat a phrase used by one very intelligent scientist named Albert Einstein: “We live in a very strange world”. With humility I would add the following: “and we do anything we can to make it even more strange”. This is my response to the question without spending a few hours to write an analysis, which at the end of the day may be disputed by others with a different concept of cause and effect.

ETF Short-term Medium-term Longer-term OB/OS
TLT SW-   SW- UP  
USO 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. The ‘*’ means that the corresponding market is under watch for developing conditions.

Summary of trend changes

Short-term:       SPY, QQQ, GLD, USO and DBC are now on a short-term uptrend. SLV and FXE were upgraded to sideways motion and TLT was downgraded to sideways motion.
Medium-term:  TLT was downgraded to sideways motion.
Longer-term:   USO is now on a longer-term uptrend.

Number of changes on the trend table: 10 

Overbought/Oversold Conditions: There is only one ETF under watch, USO.

Have a good trading week!

Disclosure: no relevant positions.

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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