As I expected, the employment news was not good on Friday, and it pushed the markets lower right into the close. The relatively steep, back-to-back down days has put the markets back in precarious position technically. Many stocks and indexes are now stretched but not oversold, while sitting at, or just below, major support.
The best thing for Monday for the bulls would be a gap down below the Friday lows to tip the hand on the bulls resolve. This would let us know if the market has enough confidence to catch the falling knife. Let's see if the markets hold up.
For the bears, the market is far from oversold by many measures, but support areas need to watched closely for a bottom.
S&P 500 (SPY) Closed under the 50 DMA putting in it back into an unconfirmed warning phase on heavy volume. The big support number is 135.75. Look for resistance at 138.12 and 139. If there is a rally, look for resistance at 138.12.
Russell 2000 (IWM) Even as the weakest of the market watch 4, it is still above its swing lows from March and April in the areas of 78.13. If that is broken, 75.40 is a good target. If the market rallies look for resistance around 80.
Dow (DIA) Sitting right under the 50-DMA and on top of a good channel line based on the highs from 4/17 and5/1. Its trend line from the lows on 4/10 will be support at 129.50. Key support levels below are daily swings at 128.16 and 126.92. A rally will find resistance at 131.
NASDAQ 100 (QQQ) Filled its island gap from 4/24. The support point to focus on here is the April swing low of 64.45. Below this level there is a scary view of the 200 DMA at 59.11 with a little support at daily swing at 63 and a trend line at 62. If the market rallies, look for resistance at 65.50.
GLD still consolidating in a tight wedge on the daily in a bearish phase.
XLF (Financials) Back into a warning phase, and the next big support levels are 14.92 and 14.40. If it rallies look for resistance at 15.25
IBB (Biotechnology) Sitting over the 50 DMA. This is still one of the strongest sectors.
SMH (Semiconductors) Back into a confirmed warning phase. It's near the bottom of its daily range which has support at 33. A break of 33 puts its 200 DMA in clear view at 31.50
XRT (Retail) This is the most interesting index as it has been one of the strongest and it is sitting right on its 50 DMA. Friday saw the biggest volume since 1/5. We'll see if that was confident buying. The swing lows are done at 58.73, but there should be support in the 60 area and 59.30 first.
IYT (Transportation) It's back into the wedge on the daily chart from the lows in Feb. and the highs in March. I held up well above a wall of support at 92.80. Lower support is at 92.50 and 91.40.
IYR (Real Estate) The best index on this sheet held above its 10 DMA and a trend line from the 4/10 lows. If the markets hold up this is one to consider on the long side. If it heads lower the real support is 63.
OIH (Oil Services) USO had its worst day of 2012 gapping through its April lows. OIH managed to hold its April lows, but only by a few cents. These lows are at 38.30 vs. Friday's low of 38.35. Look for support there. The big numbers below these lows are 37.50 and 35.80.
XLE (Energy) Very similar to OIH, it held its April support level of 68 by a few pennies. But it also has an April low of 67.68. Look for support at Friday's low of 67.97 as 68 is a big number. Below that is 67.68, then 64.80
TLT (Lehman 20+ Year Treasuries) Given the bearish news and tone to stocks I would have expected more from the TLT. It had a solid up day, but given its tight daily range it had, and still has, the potential for a substantial more higher. It has an April high at 118.41 as resistance. Look for support at 117.75. A sudden strong move higher in TLT could indicate a level of fear that would continue to put pressure on stocks.
Longs:
Tread carefully with the longs buying after Friday's action is "picking a bottom" which is very difficult and dangerous even if your stock doesn't look like the market. Be disciplined and patient.
In addition to the regular categories, you'll find new list of "Oversold Candidtates"
On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
MJN
IBM
UNP - only one day under the pivots
Category 2: (Pipeline) Positive Phase, Condition 2-3, 2 days under the FTPs, Risk to Previous day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
AAP
PNC
EQIX
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means candidate for Opening Range Reversal, Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry:
LTD
CREE
TIBX
UA
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 1-4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
None today
Oversold candidates. This is a list of stock that have a 2 day RSI of 2 or less and sit at support. I'll watch them for opportunities over their FTP if the market firms up.
CLF
TROW
KBR
NDAQ
COST
BLL
ARUN
GS
PFG
Shorts:
It was difficult to find stocks that were in a condition to be considered "fresh" shorts. These look like they have good potential to continue down or be sold on an OR reversal:
CLF
TROW
KBR
NDAQ
COST