December 8, 2013
Mish's Daily
By Mish Schneider
We ended Thanksgiving week thinking that volume would be the main indication for when this market could see a significant enough top to make that claim, as opposed to the orderly and healthy correction that the first week in December yielded. We looked for a blow off rally on double or more the average volume. Instead, what we got was some distribution days in volume, particularly in the small caps (Russell 2000s) which told us that a correction was coming, but clearly not the end of days. Volume indicators are extremely useful tools if one knows how to interpret them. Big volume up or down is not enough to make any succinct predictions. It’s the ability to interpret the relationship of the volume relative to each day and the daily average along with explosive candlesticks or price action in any individual instrument that separates the professionals from the novices. Ok, so yeah, I know a little something about volume. This week ended with NASDAQ on new highs but not the Dow, S&P 500 or Russells. Remember my vote for the most likely to succeed last week-NASDAQ? Volume though, not impressive, except for the accumulation day in S&P 500. Yes indeed Thursday’s inside days showed us the way on Friday after the gap higher. Even with the Dow closing up $198.69, folks are hesitant to go in. In fact, more than hesitant, they get negative if a 5 minute candle is red even on a strong up day. Talk of bubbles, confusion on what the economic numbers mean-typically those are already priced into the market. These factors plus the constant rotation of sectors and groups are why many remain in cash. Therefore, I will continue to look for the late arrivals to the party, the huge surge in volume and a blow off rally as go-to signs that tell the tale.
S&P 500 (SPY) 180.40 now support with 181.11 the 2013 highs. Incidentally, a while back I wrote that the measured move on this was ultimately 220.
Russell 2000 (IWM) Last Friday wrote-112.43 has to clear to get excited-it closed at 112.48-so replacing excited with encouraged.
Dow (DIA) 159.50 becomes an important area of support
Nasdaq (QQQ) Our runaway gapper from October 18th has had a sterling run.
XLF (Financials) We all like to see financials doing well-not so the CEOs get richer, but for confidence in the overall market. Therefore, 21.45 really has to clear
SMH (Semiconductors) New 2013 highs!!! And what might be the start of a runaway gap
XRT (Retail) “Looking a bit heavy unless it clears 87.75”-and so it was-broke down Friday with a pretty significant bearish engulfing pattern, but on low volume
IYT (Transportation) 128.40 good point to hold now for it to continue
IBB (Biotechnology) Held 219 and closed well. 230 not a bad target if 219 holds
IYR (Real Estate) Cleared the fast moving average. Friday’s low now important to hold
XHB (Homebuilders) It held the 50 DMA and now has to clear 31.50 to continue
GLD sloppy trading Friday-but no major rally either so the reversal candle may not hold after all for more downside
USO (US Oil Fund) Pushing against the moving average resistance.
OIH (Oil Services) I like the long term chart so watching for a move over 48.45
XOP (Oil and Gas Exploration) Considering the run in 2013, its ending more ominously if cannot get back over 68.70
TBT (Ultrashort Lehman 20+ Year Treasuries) 102.16 in TLT is ridiculously key to predict the future of rates
EWG (Germany) 30.33 is the low of the island top to clear to negate that pattern
FXI (China) Weekly close over 40.00 good-could see much higher levels in the coming year
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