Last week was a bit of relief for longs in the market, with gains on four of the five days.
Earnings reports were received with enthusiasm, although most contained issues of warning for upcoming headwinds for investors to anticipate in the coming months to years.
The Federal Reserve stayed in line with expectations, announcing a .75% increase in rates, which also helped the market as there were no surprises, however there was some future uncertainty that was discussed on that front as well.
SPY, the SPDR S&P 500 ETF had one of its strongest weeks in 2022, and ending the week on a 1.46% gap up Friday.
Expect to see some pullback & shake-out this week, as their RSI is entering overbought territory, and with that their MACD will follow bearishly.
Volume this last week was also not particularly high, showing that market participants still have some reservations.
QQQ, the Invesco QQQ Trust ETF that tracks the performance of the NASDAQ had a very similar week.
Their chart also tells the same story as SPY’s, and earnings calls this week are likely to be the straw that breaks the camel’s back.
Big banks & big companies, especially tech have all reported earnings now, but many of these companies are less likely to be negatively impacted by the current state of the economy vs. the smaller companies that will be reporting in the coming weeks.
We will get better insight not only into the true state of the consumer, but also the state of the American worker, as companies will surely be discussing layoffs & hiring freezes.
Let’s take a look at the best & worst performing sectors & geo-location ETFs from a technical perspective.
Natural Gas (BOIL), Soybeans(SOYB), Water Resources (PHO) & U.S. Infrastructure Development (PAVE) Are All Bullishly Leading The Market
BOIL, the ProShares Ultra Bloomberg Natural Gas ETF has rebounded from its drop in June, almost recovering most of its recent losses.
This past week they began to fall, with their MACD now turning bearish & their RSI retreating back down to neutral after a strong month of July.
This would be a good time to have some protection for BOIL holdings in the form of puts, as they do not offer a dividend to cushion investors.
SOYB, the Teucrium Soybean Fund ETF has also fared well over the last 2 weeks & finds itself now re-testing resistance from late June 2022.
Friday’s 1.75% gap up was on above average volume, signaling confidence among investors, & it looks like SOYB could begin to establish a new price range around the $27.38 range.
They will need to break above $27.90 to continue their bullish march forward, but their RSI is still on the overbought end of neutral & they may have more momentum in the near-term.
Like with anything else these days though, keep an eye on the puts as insurance in this volatile market.
PHO, the Invesco Water Resources ETF has had an extremely strong last couple of weeks, recovering much of its losses that were incurred since March 2022.
Their volumes have been below average consistently since early March, signaling that there is not a high degree of confidence from investors.
The $52.23 price level will be their next test, although they may not break above it right away, as their RSI is overbought & there is sure to be some settling down into a price range in the near-term.
With a small dividend (0.25%) & options, there are multiple ways for investors to protect themselves while this new price range is established.
PAVE, the Global X U.S. Infrastructure Development ETF has also recovered most of its losses since March, after an especially strong past week.
They too have an overbought RSI, and if they can’t break above the $26.66/share resistance level should begin to establish a new price range between there & $25.57.
Their dividend is a bit healthier than PHO’s at 0.65%, but that is the only cushion for these shares as there are no PAVE options.
Dry Bulk Shipping (BDRY), Homebuilders & Supplies (NAIL), Germany (EWG) & The Euro (ULE)Are All Bearishly Lagging The Market
BDRY, the Breakwave Dry Bulk Shipping ETF has had a difficult past year, losing ~71% of its share price since September of last year.
Their RSI is oversold, and they will now need to try to break above the $13.80 resistance level.
Recent volumes are not indicating much confidence in their share price, and there may be more damage to come in the near-term.
NAIL, the Direxion Daily Homebuilders & Supplies Bull 3x Shares ETF has begun to recover from its 2022 losses & now faces a test at the $38.54 price level.
Keep an eye on their MACD, as it is beginning to curl over bearishly & looks to be signaling there is some near-term losses on the horizon.
NAIL does not offer a dividend, so all protection will need to be in the form of puts.
There is not much in terms of support until the $34.20/level, which is something to keep in mind as you do your research.
EWG, the iShares MSCI Germany ETF has rallied back from its low for the year over the last couple of weeks after a steady decline for the last year.
They will need to test the $24.14 level, but have support at $23.31/share, which when combined with their 4.56% dividend yield looks to have an appealing possible entry-point for a position.
However, based on their MACD’s bearish leveling off, it would be wise to also have some puts as protection too.
ULE, the ProShares Ultra Euro ETF also experienced a bit of a brief bounce over the month of July, after also falling steadily over the year prior.
I would expect them to move in similar fashion to EWG, and their technicals are all on a similar page as one another.
Look for them to try to break above the $10.62 resistance level, with $10.27 being the first stop down in terms of support.
Tying It All Together
This week will be a continuation of earnings, where stocks will look to keep up the same momentum that powered them through the last few days of last week.
Based on recent trading volumes there is still a lot of uncertainty surrounding where the indexes will go next.
Manufacturing numbers & employment opportunity numbers are expected to drop modestly in this week’s announcements, while there is a slight expected increase in PMI coming in Wednesday’s announcement.
The non-farm payrolls numbers are expected to decrease dramatically, but the unemployment rate is still projected to be 3.6%.
James Bullard & Loretta Mester are both scheduled to speak as well, with markets responding positively last month for Bullard after he spoke.
While the recent bear rally may continue into the week, don’t expect it to gather too much steam.
*** I DO NOT OWN SHARES OF SPY, QQQ, BOIL, SOYB, PHO, PAVE, BDRY, NAIL, EWG & ULE AT THE TIME OF PUBLISHING THIS ARTICLE ***