Ba De Ya-Dancing in September

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Earth, Wind and Fire-September

All last week I wrote about the trading range and how once it broke one way or another it would set the stage for the next few weeks. I also wrote that the way the interest rates range broke (TLTs) would also most likely set that near-term trend.

So what happens when the range breaks intraday but not on a closing basis? Let’s examine the small caps or Russell 2000. The best low to go off of was the one made on August 25th 115.32. Although it broke it briefly intraday on Friday, we typically and consistently go by closing price. Therefore, looking here, best we can say is that it held on, but hasn’t resolved the range just yet-phase bullish counts for something.

Although in much better shape than IWM, QQQs, SPY and DIA have similar patterns with one difference, they all closed nearer to the top of the trading range.

Interest Rates decidedly broke down from the trading range from August 25th on. However, the phase remains intact. Based on the theory of Friday’s direction as the decisive one, safe to assume rates will continue to move up with the 50 DMA a line in the sand.

As far as the indices go, if Monday begins with a gap higher-close your eyes and follow. If opens around unchanged, look for support at the floor trader pivots. If it gaps lower, consider that equally decisive and watch for short hedges.

Our Market Tone indicator worked off the 2-day negative bias-a new short-term bias will post on Monday. Now, the intermediate term or 10-20 days out reads bullish. Wouldn't that be nice?

S&P 500 (SPY) 199.39 a solid low now clear support level. 200 pivotal and 201.58 the magic number to clear.

Russell 2000 (IWM) Over 166.80 a great start. Otherwise, the 50 DMA at 114.95 an important level to hold

Dow (DIA) Most likely to gap higher over the recent highs 171.56

Nasdaq (QQQ) 99.00 super important support to hold with 11.25 a great area to clear; then the highs are next

XLF (Financials) Like that this closed green-good sign for Monday

KRE (Regional Banks) Totally focused here on the basing action-especially if clears the 200 DMA

SMH (Semiconductors) 3 shooting stars look like they want to resolve to the upside

IYT (Transportation) Another new high close

IBB (Biotechnology) Over 272.85 back in business

XRT (Retail) Held the weekly trading range lows-now needs to clear the highs

IYR (Real Estate) 76.21 is the 2013 high

ITB (US Home Construction) Not my first choice but sure would be nice if this plays along

GLD Inside day below all the moving averages

Metals and Mining (XME) Major support at 42.45

USO (US Oil Fund) It’s all about two areas-34.50 and 36.20-in between noise

OIH (Oil Services) Possible reversal candle from the morning low of Friday.

TAN (Guggenheim Solar Energy) Inside day and looking marvelous-issue is risk

TBT (Ultrashort Lehman 20+ Year Treasuries) 58.52 is where the overhead moving average is

UUP (Dollar Bull) DOji inside day near the highs

IFN (India Fund Inc.) Extended but what a move!

FXI (China Large Cap Fund) The ETF model still owns this one