Cerberus: Guard of the Underworld

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Greek Mythology

Having deja vu all over again, the small caps or Russell 2000s travel to their own beat, breaking under the 50 DMA for an unconfirmed warning phase for the 4^th time this year. Furthermore, that happened on better than average volume. As one of four indices, if we look in the complete opposite direction, the Dow closed on new highs!

The first time in January, while IWM broke down, the Dow followed eventually. In early April, a delay of a drawdown in DIA after IWM broke the 50 DMA happened as well, but not so in June, when the DIA held steady regardless. That leaves a few possible scenarios to speculate on presently.

1. IWM returns over the 50 DMA with a big never mind, sorry to scare you bulls.
2. DIA gets an ugly, high volume reversal pattern from the highs and proves its weak sister a predictor of things to come
3. The other two indices SPY and NASDAQ clarify next direction by taking sides-either reversals from the highs (incidentally, SPY did not make a new high) or a continuing rock steady consolidation at its current levels.

Interest rates remain low while the US dollar firmed from its recent lows-this happened before as well. But firming is not the same as reversal of trend, which the US dollar has yet to do until it clears its 200 DMA. Therefore, that relationship should help clarify near term macro trends.

And finally, sector and group rotations-Energy, Semiconductors, Real Estate, which have all been leading this year-look spiffy again. Our longer term ETF portfolio fund has held steadfast in those 3 groups, in spite of soft corrections-surely that means something!

S&P 500 (SPY) 198.29 the highs to clear with 197 major support to hold

Russell 2000 (IWM) Unconfirmed warning phase with the 200 DMA not so far if it can’t get back over the 50 DMA

Dow (DIA) New highs

Nasdaq (QQQ) New highs but a close that does make me a bit uneasy, especially if this breaks 95.70 and closes weak on Thursday

XLF (Financials) Inside day with 22.85 key support to hold

KRE (Regional Banks) Tomorrow earnings on tap include lots of regional banks-then we can see if this holds the major moving averages or not

SMH (Semiconductors) Doing what this group does-rocks on!

IYT (Transportation) New highs with target around 160

IBB (Biotechnology) The 50 DMA coming up at 245.09

XRT (Retail) close to support and if good should hold here

IYR (Real Estate) Overbought but loving the soft rates

ITB (US Home Construction) Got a boost from homebuilder confidence statistic. Now, has to prove it’s not a one day wonder

GLD Cannot really say much until this breaks the 50 and 200 DMAs

USO (US Oil Fund) Possible island bottom but not a new low if confirms Thursday

OIH (Oil Services) Looks much better

XLE (Energy) Back with a potential leadership position

TBT (Ultrashort Lehman 20+ Year Treasuries) 113.82 in TLTs is where we started this week looking

UUP (Dollar Bull) confirmed recovery phase-keep watching

FXI (China Large Cap Fund) New highs for 2014