May 3, 2012
Mish's Daily
By Mish Schneider
There's nothing better to ferret out the resolve for the bulls and frustrate the bears than a divergent gap down in the major indexes. The divergence was the fact that the QQQ and IWM gapped below their prior day low while the SPY and DIA did not. The result of such a condition is often that the bigger trend (the phase) wins. On Wednesday, that meant a choppy upward bias after a weak gap lower open.
Sure there were good reasons to gap lower, ADP Payroll numbers were disappointing, Spain's markets were sinking, and the U-turn pattern from Tuesday needed one last push lower. But the Dow and SPY refused to breakdown, and Opening Range reversal patterns gave us a clear indication that it the gap had flushed the bearish sentiment for the day.
The bigger picture, however, is that the market is waiting for Friday's employment numbers. Three of the last four day's have been more consolidation than trend and even the trend day (Tuesday) reversed. So I expect more of the same for Thursday - the 5 day range will likely define Thursday's price boundaries.
All four market watch have their own version of the same pattern that has been building for the last 5 days - a new bullish phase breaking out over a prior swing high and consolidating in a new range.
S&P 500 (SPY) Bottomed pennies from the 139.49 level suggest as support yesterday making this an extremely pivotal area now. The range to focus on is 139.40 as support and resistance at 140.79 and then at 141.66.
Russell 2000 (IWM) Continues to straddle the 50 DMA. The range to focus on is 80.50 to 82.50 and 83.
Dow (DIA) The one to be long when market rally and the only one to have and inside day. The range to focus on is 131.40 to 132.70 and then 133.14.
NASDAQ 100 (QQQ) Holding firm over its 50 DMA and trend line from the highs, but still below important daily resistance level of 67.50. The range to focus on is 66.00 to 67.63.
GLD Consolidating in a base in a bearish phase. Wait for a compelling pattern.
XLF (Financials) Right back into it's own 5 day pattern similar to the one described for the major indexes above.
IBB (Biotechnology) A nice strong inside day. There is a lot of support at 124 now (just below its daily low), and with 3 days of consolidation it could be ready to move higher again
SMH (Semiconductors) Straddling the 50 DMA like the Q's but closed near the top of the 4 day range. If it moves higher it may trend up, but 35.25-25.33 is big resistance.
XRT (Retail) A nice strong inside day. There is a lot of support at the 61.30 area now, and with 3 days of consolidation it could be ready to move higher again. 63.00 is a major daily breakout if it can do it.
IYT (Transportation) Nice follow through of Tuesday's good breakout of the wedge on the daily chart from the lows in Feb. and the highs in March. Let's see if it can hold above 95. This ETF could surprise traders to the upside.
IYR (Real Estate) Has had a nice move up. Now has an inside day. 63.81 is a pivotal area.
OIH (Oil Services) Quietly consolidated at a good support level on the daily chart, but remember it is in a bear phase and came off the 50 and 200 DMA on Tues. Be careful of weakness.
XLE (Energy) Quietly consolidated after a nice run up to the 50 DMA consoldation is what the bulls need as it is stuck between the 200 and 50 DMAs
TBT (Ultrashort Lehman 20+ Year Treasuries) Stuck in a range which may give it has a good base to move higher from, but with jobs data due out Friday, I'll stay away.
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