Where we have been, where we are now, and where we are going!

Hello and welcome to ETF Technical Trader! The major market indices have not done much in the month of December, but they did manage to squeak out higher highs. Even the broad indices managed to catch up to the major indices.

One thing that is significant from the month of December is that the U.S. Dollar and interest rates may have turned. Gold has fallen hard from its highs, although oil has traded sideways.

You may need to stay close this next month and especially the whole year of 2010. I have reason to believe that the markets I follow will not be as boring as it has been in the month of December. The last trading day of 2009 has not been a good day as I write this e-zine. Could it be a signal of what is in store for 2010? We will see.

Last month I introduced a new feature. I have devoted part of this Site to you, the visitor and reader of my commentary. You will see a new section on the NavBar saying, “Your Web Pages”.

The pages below that NavBar are yours! You can comment on market direction of the charts I have provided. You can post your technical analysis and your own charts for all to view. Tell everybody what indicators you prefer and why. You may want to discuss the fundamentals of the market. Just make sure it is relevant to the topic. You can always contact me if you know of other topics you would like for me to add. Jump in and get involved!

This month I have added another new feature! I have added a new page called “ETF TAZ”. This new page will be devoted to short-term trade recommendations based on a Swing Trade method called TAZ (Traders Action Zone). I have mentioned TAZ in other parts of this Site; however, this paged is nothing but TAZ. Click on the ETF TAZ NavBar to get all the information on TAZ.

I want to remind you of another new feature to the Site that I had added a couple of months ago. I have placed tables on the fund pages that show my track record. With a glance, you can see where I have been successful and where I have failed. You will notice that there will be a column for current open trades profit or loss and the running total for closed trades profit or loss. I hope this will benefit all. I am sure it will help keep my feet held to the fire!

One more thing I want to mention. Remember to check out My Blog for current updates. If anything changes or I need to qualify a previous post, I will do so there. I will have links if necessary to take you to a chart and the previous analysis so you can get a full understanding of my analysis and comments. Sign up for the RSS Feed and you will always know when I post to My Blog and have quick access to the charts and analysis.

The recommendations made in the Index Funds were stopped out during the month of December. I am standing aside and waiting before I jump in and make another recommendation. The major indices are potentially topping and I do not want to jump in until I have confirmation of a change in trend.

You should be holding FAZ, PST, SKF, TBT, DUG, SCO, DZZ, and GLL if you had been following my recommendations. These trades have been active much longer than I had anticipated. Hang on, because your patience will be rewarded soon.

I will not discuss my analysis of each fund. I will cover only one fund in each category for you to get the main point in direction and potential move for the sector with that one fund. I will use SPY for the analysis of the entire Index Funds. I will use XLF and TLT to cover the Financial Funds. I will use DUG for the Oil funds. I will use GLL and ZSL for the Gold and Silver Funds respectively. So, let’s get started!

SPY is right up against long-term resistance and it is evident due to the lack of ability for the price to break away with any significant volume. The top may be complete evidenced by the candlestick patterns shown on the chart. There have been two consecutive bearish engulfment candles in the last four trading days of the year!

I do not see an Elliott Wave 5-wave move to the down side as of yet. It may be forth coming, but for the time being, I will wait. One critical level that will signal the downtrend is about to resume is a break below the 11/27/09 low. We may get a signal before then by the wave count, however, a break below that level will most definitely be confirming.

What information can we get out of this chart? One thing is the fact that the financial sector has not made new highs as the major indices have. This could be a significant divergence.

I here people on the financial news networks say financial stocks are good buys now because investors will be rotating into the financials in the beginning of 2010. I do not buy that. The financials were the reason for the meltdown in the first place. I do not think they have fixed the problems, just covered them up. If they had fixed the problems, the price would reflect that fact. I am actually more concerned about the foreign problems in the financial sector than I am the U.S. financials.

Now back to the task, technical analysis. I believe the financial sector topped in October with the first wave down ending on 11/2/09. Since then, we have been in a corrective pattern, a long one at that. The correction seems to be a Elliott Wave Flat corrective pattern. It is possible that wave C of the correction ended in the last week of December. The critical support level is wave-d low on 12/18/09. A break below that level will signal that wave III has started. The first week in January will be critical for the interpretation of the pattern and future direction of the price.

I have said for the last two months that a potential Head and Shoulders pattern is forming. It has not confirmed it, but it has not been discounted either. That is something worth keeping a close watch.

If my Elliott Wave count is correct, we should see a significant decline in the coming days and weeks. I have labeled a potential iii of 3 of III wave down coming. That indicates an intense drop in price is around the corner.

If a top in the major indices is in doubt, the bottom in interest rates is not! It cannot be good for stocks if the interest rates are moving higher.

I have plenty of Elliott Wave labels on the chart and hope it is not too confusing. The main emphasis is that according to my interpretation, OIH is about to start wave 3 of III. That indicates a huge drop that will be intense as it happens. I look for OIH to fall to 88 as my initial target.

The 12/28/09 high is the critical resistance that will alter my interpretation if broken. The B wave low of 12/17/09 is critical support that will confirm my interpretation if broken.

At the close for the last trading day of 2009, the candlestick painted a bearish engulfment. All four days prior were weak as indicated by the close for each day being below the open.

The price must stay above the 12/16/09 low for the bullish stance to have any legs to stand on. The price needs to push above the 12/22/09 high to confirm that the change in trend has occurred.

A break out above the 12/30/09 high will be a good sign that the up trend is moving on. I can count five waves up from 12/28/09 through 12/30/09 when viewing a 60-minute chart. This should be wave 1 of III. Wave 2 potentially could be complete. A drop below the 12/28/09 low will not be good for the bullish stance.

I anticipate major changes in 2010. I expect interest rates to increase significantly and major indices breaking the March lows. I also expect oil, silver, and gold to fall significantly.

If you disagree with my expectations for 2010, come along and follow me. Time will tell and I hope to keep everybody abreast of what is going on no matter which direction the markets take. My goal is to keep safe your financial health.

Have a Happy New Year! Talk to you next month! You can contact me anytime if needed when you have questions concerning my analyses or recommendations. You can go to Contact Us to fill out the required blocks and then post your comments before sending.

Be a smart trader!

Craig Wells