On July 7th, S&P 500 made an island top, then after a substantial dump, ran back up to 134.82 on July 21st which was the last gasp before the selloff to 110. I begin with this information since these legendary technical formations are typically what tops are made of. Another one would be an intraday reversal-opening on new highs and then closing near the intraday low. Yet another would be a blow off rally on huge volume. And finally, an orderly repeated test of an area of resistance such as price or a moving average, then a failure from those levels. Relative Strength index is indeed an indicator, but any professional trader will tell you that something overbought can get way more overbought.
S&P 500 (SPY) Ended with a gap up on good but not amazingly good volume and did not clear the July 21st high (Friday's high 134.62) which is the only thing I see that could mean the island top is still there spelling potential trouble. This of course is assuming we do not fill the gap to 134.88 (the low of the island). Then, do not be surprised to see more from SPY.
Russells 2000 (IWM) If opens under the gap low from Friday, could be cause for concern but not necessarily panic since unless it gaps lower and creates an island, digestion would be great for the RSIs
NASDQ (QQQ) 64.00 still a target unless it gaps lower, or makes another new high and then closes really weak.
ETFs:
GLD Been both short and long, and began the year bearish. Under 167.05, the gap low from 2 weeks ago, will look for a new short entry.
XLF (Financials) If this group can digest, then tackle and close above 15.00-will be the first close over the 200 weekly moving average since the week ending October 26, 2007.
XRT (Retail) New closing high and not overbought.
IBB (Biotechnology) WOW
SMH (Semiconductors) Did not have a breakaway gap like so many other sector ETFs did. So, venturing to say keep your eyes on this one as the best indicator if Humpty Dumpty is about to fall.
IYT (Transportation) New high close since mid-July after looking a bit vulnerable. Not overbought.
XLE (Energy) Back looking at 73.17, the high from 10/28/11 and 1/26/12.
TLT (20+ Year Treasury Bonds) Nasty gap lower and now watching to see if holds 115.55 January's low.
Longs: With so many stocks looking overbought, new swing entries are harder to find. We were first in many huge gainers before the market exploded. Hopefully, you have learned firsthand that the 6 phases we watch give amazing opportunities to catch the moves early and when the price is cheap (minus the bottom picking mentality.) Note: APC reports Monday after the close-please exit.
JCP 4 days under the FTP so now to be sure it can clear, wait for it to take out the recent highs 42.29 since not overbought and has room. Then has a really nice base on the weekly so would manage as a swing trade watching the daily RSIs. Day to Short-Term Swing.
JWN Now has positive pivots at 50.07 with risk at 49.48 and could finally be getting ready to power out of this area if can clear and close above 50.85. Not overbought. Day to Swing
IBM (Narrow Range 21) Has to clear the peak high from last week 194.81 for next leg up with risk 192.56. Then could see its way to 206.00 area. Day to Short-term swing
COL Getting ready for a golden cross and has not moved out of the recent range. Pivots are positive at 59.15 with risk at 58.23. If can move beyond these levels and above 61.46 could see 66.00 next. Day to Short-term swing
LULU (NR 23) Also has to clear current range or above 65.00 to see a new leg up. Positive pivots at 64.47 with risk 64.00. Then could see 72.00 level next. Day to Short term Swing
ESRX (NR 8) has to clear 52.80 with positive pivots at 51.98 and risk 51.44. Then could see a push to 2011 high 60.89 and beyond. Day to Swing
Honorable Mention: WTW (We shorted, got out and now with inside day, above R1 73.85, could turn back up). Pivots Positive OR Reversal Candidates: TPX (68.53 risk) ALTR (39.92) MOS (57.25 Risk)FSLR (Risk 44.94)
Shorts:
ABX Sitting on the moving averages so would like to see it break 47.95 for a swing short and move down to 42.90 first. Negative pivots at 48.97 with max risk 49.47. Day to Swing
SINA Inside day and bearish engulfing pattern bumping up against the 160 EMA with max risk 77.80. Also needs to break S1 which lines up well with Friday low 73.44. Then could see a drop to 69.00 the 10 DMA and if gets real ugly, perhaps another test of the 50 DMA 60.50. Day to Short term Swing
WLL Reports in 19 days. Has negative pivots and needs to break the 50 DMA at 48.27 to see a possible selloff to 40.00. Risk 49.92. Day to Short-term Swing
Honorable Mention: DVN (Cannot Clear 64.84) WPI (59.15) WLP (65.91)
Have a great Superbowl Sunday!