Can We Trust The 10 DMA?

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For the first time since Oct 17th (just 2 days from the October lows), the SPY closed under the 10 DMA. The QQQ and the DIA still have not, and the QQQ’s didn’t even penetrate it by much today. This simple method of following strong markets works great, and the longer a market travels without a close below (or above) that 10 DMA the more significant the day it crosses becomes.
On the bullish side the QQQ’s tapped it and didn’t close under and the SPY’s have a nice range today that straddles it. So tomorrow the bulls who want a swing trade can use today’s range as the trigger to be bullish with a stop under the today’s low. Or look for a opportunity to buy against the today’s low in the QQQ.
The major trend is still up and that is still my focus, but the risk of a quick sell off is elevated.For example the QQQ, and AAPL in particular, demonstrated today what I meant in my previous comments when I said that “institutional traders can be even more schizophrenic with the stark reality of their year-end P&L numbers squarely in focus”. APPL plunged roughly 8% in about 15 minutes with no news to justify it. It quickly recovered half those losses but that still leaves a lump in many traders throats I’m sure.
S&P 500 (SPY) Straddling the 10 DMA, today’s range is key, I’m neutral until it trades over today’s high and then if the other markets are in gear I’ll get more bullish.
Russell 2000 (IWM) Very weak day puts it near the low end of an important range of 118.80 to 114.00 which is the key level to hold.
Dow (DIA) Straddling the 10 DMA. Same story as the SPY.
Nasdaq (QQQ) Strongest of the 4 still, but was the weakest today. A break of today’s lows breaks the 10 DMA too, and would make me very cautious.
XLF (Financials) Sitting on support of the 10DMA and in the middle a range.
KRE (Regional Banks) Another ugly day. Broke the 200 DMA and sits on the 50 DMA but it basically in a bearish phase now.
SMH (Semiconductors) Still a market leader, but also still too extended to get long here.
IYT (Transportation) Friday’s weak action on bullish news led to a very weak day today. Sitting at a key support area of 160.60 with the next big area of support quite a bit lower.
IBB (Biotechnology) Traded lower with the market today but has good support. Still a leader.
XRT (Retail) First time under the 10 DMA and nearby 92 should be good support. Keep an eye on it.
IYR (Real Estate) Held up very well until the end of the day. Still a leader and if
ITB (US Home Construction) Sitting on the 10 DMA but next support a full ATR lower.
GLD (Gold Trust) Despite Switzerland’s vote on Sunday against stockpiling gold, it had a very strong day to close back over the 50 DMA putting it into a Recovery Phase. Worth keeping a close eye on.
GDX (Gold Miners) Nice strong day but still in a Bearish Phase
USO (US Oil Fund) Big up day and still under PDH.
OIH (Oil Services) Down again.
XLE (Energy) Stabilized and sits on the 200 week MA.
XOP (Oil and Gas Exploration) Down again
UNG (US NatGas Fund) Big gap down, and under key support of 20.60 area
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Bearish engulfing pattern and on a weak day in stocks. Maybe we’ve seen a top?