Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Thursday, January 28, 2016

Comparing the SPY, USO, VXX, & TLT Channel Charts

With most of the leader stocks either breaking down or trading erratically, many traders and investors are focusing on the big four ETFs which are the SPY, USO, VXX, and TLT.  I have posted the one-year charts of each of these four below.

click on image to enlarge

Looking first at the SPY, we see that after the bounce from the neckline of its two-year wide dome top and breaking out of its three-week declining channel (shown in pink) it has just been chopping sideways the past week at the blue line support level coming across from the late September low. The SPY is also trying to declare the green channel as its new dominant channel.  It is a declining channel also, but it's better than the steep nosedive channel it just broke out of.  

Below the SPY, I have the VXX (short term VIX futures ETF) where it peaked at the upper line of the blue channel at the same time the SPY bottomed at its neckline.  A few days ago, the VXX fell out of its three-week rising channel as the SPY broke out of its three-week declining channel.  The VXX is also chopping sideways just above the support of the center line of its blue channel.  Herein lies the problem, the SPY and the VIX should not both be sitting on support.  If the VXX is sitting on a support line then the SPY should be up against resistance since they trade inversely.  This deviation from their normally opposing relationship is because the SPY is being vigorously propped up this week and anytime it is being manipulated it gets out of sync with its inverse relationship with the VXX.

Next, looking at the USO (US oil fund ETF) we see that it is breaking out to move higher but looking below it at the TLT (20-year bond ETF) it is also set up to move higher.  Here again is the same problem as above, they have been trading inversely but they are both set up to go higher together now.  The TLT is too big to manipulate by anyone but the USO isn't too big and it is currently under verbal manipulation by countries around the world as everyone that is getting decimated by falling oil is announcing that they may talk about cutting production to see if they can get a short squeeze going without actually having to cut back on their production.

Lastly, the TLT continues to work its way higher after recently breaking out of its one-year declining channel.  The TLT is increasingly becoming the favored spot for equity cash-out money as it continues to climb distancing itself from its previous one-year declining channel.

Trade well my friends


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