A Pair of Powerful Fibonaccis
Our resident technician looks at seven ETFs for new trade ideas
- DBC is looking bullish.
- Dow Transports fracture and splinter.
- The semiconductor index looks bearish.
We begin with Invesco DB Commodity Index Tracking Fund (DBC), the commodity fund, which is looking fairly bullish. Not only have prices busted above the descending channel, but there’s a well-formed base I’ve tinted in green which suggests higher prices again. Thus, more inflation, which might put the Federal Open Market Committee in a tight spot in 2024.
Dow Transports fracture
The Dow Transports are starting to fracture and splinter. As of the end of July, it looked like the bulls were going to completely dominate any surviving bears. As of now, it’s just one failed bullish breakout after another, with this one being a higher interest rate.
The corporate bond fund has been range-bound for eons. If we can take out that lower supporting horizontal line, higher interest rates (and higher corporate expense to support them) are at hand.
The tech stocks are interesting right now. On the upside, we have that dashed line representing the price gap hemming in prices, and to the downside, we’ve got a Fibonacci sequence, which provided strong support on Thursday. Break it, and the market has an opportunity to work toward that lower level, shown with the magenta line, which is two Fibonaccis that converge at almost the same spot.
Semiconductor index looks bearish
The semiconductor index is looking potentially like a great bearish trade. So far, so good. I think this is one of the best set-ups going as I contemplate the week in front of us.
The S&P 500 ETF has an identical setup to that of the QQQ. We’ve got a dashed line acting as resistance, based on that price gap, but we need to pierce the horizontal Fibonacci to give us the opportunity to hammer down to that supporting, ascending trendline, shown in green below.
Lastly, here is an updated chart of the percentage of stocks above their respective 200-day moving averages. Pretty compelling how clean the topping pattern is, isn’t it? I find it fascinating that even a derived indicator such as this has the courtesy to form a shape. This time, we could break below the pattern. We were JUST about to do so gloriously last March, but of course the BTFP program launched by the Treasury department delayed that, at least until now.
Tim Knight, a charting analyst with 35 years of trading experience, hosts Trading Charts, a tastylive segment airing Monday-Friday. He founded slopeofhope.com in 2005 and uses it as the basis of his technical charting and analysis. Knight authors The Technician column for Luckbox magazine.
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