As the week concludes I wanted to look at a couple of charts in position to breakout and add to the upside momentum. The S&P 500 index cleared resistance at 1370 earlier this week and climbed above the 1400 level on Thursday. The NASDAQ cleared the 3000 mark and the Dow broke above 13,000. The broad market indexes have been solid through the first part of the year and other key sectors or indexes are in position to add the upside near term.
Small caps pulled back to the trendline last week and bounced back to the high this week. The chart below of the S&P 600 index shows the resistance in play at 463 for the index. A break higher is an opportunity to add to the sector. The resistance goes back to the last trip in June of 2011. Momentum has picked up in the stocks despite the test last week. Our short term target would be 485 on the move through this resistance level. ETFs to watch are IJR as it reflects the index.
Crude oil has been in a consolidation pattern following the move higher. The descending triangle shows the uncertainty pertaining to the price of crude looking forward. The test of support is in play along with the uptrend line just below the current support level. OIL, iPath Crude Oil Trust Index ETN shows a potential play on the bounce building should crude oil regain some of the previous momentum. The initial move has been speculation relative to Iran/Israel, but with the improving economic picture the demand side will become an important part of the equation. Watch for bounce and test of the previous high near $28.
Treasury bonds broke support this week on the rise in interest rates. The long end of the yield curve is where the most damage will occur and the chart of TLT below confirms that prognosis. The yield on the thirty year bond climbed above the 3.2% resistance point on the week and the result was a decline of nearly four percent for the bond price. As we stated earlier this week the short play on the bond set up for a trade and has now followed through. TBF, ProShares Short 20+ Year Treasury Bond ETF is the non-leveraged way to be short the bond in an ETF. The leveraged, two times, fund is TBT. Remember leveraged funds were created for daily trading not holding in a portfolio.
Options expiration is likely to keep the positive momentum going in today’s trading. Watch IYT for a follow through on the move Thursday. The rails got positive comments from analyst pushing the overall sector higher. Take what the market give one day at a time and protect against the downside risk by using stops