GLAMGLOW: Supermud To Clear the Pores

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We came into the week expecting that the plethora of inside dayswe saw at the end of last week, particularly in the indices, were foreboding. Indeed, that’s how the session began.

However, we have several factors we had to consider before we shorted heavily into the morning gap lower. First off, the phases. S&P 500 closed marginally bullish on Friday, now back to an unconfirmed warning phase by end of Monday’s session. Unconfirmed that is, while also holding last Thursday’s lows thus far.

NASDAQ held last week’s lows and 98.05, which is really the place it took off from on Friday. Noteworthy, the phase remains bullish. TheDow took out last week’s low initially, but then proceeded to run up and hold onto 170 plus its bullish phase.

The small caps, aka Russell 2000s, broke last week’s lows by 3 cents and also turned to defend 110-the now home on the range in its world. Phase is bearish as it has been for about a week.

Sectors and groups of note as all held the 50 DMAs:Biotechnology, Semiconductors, Transportation and Financials.

If we look at the Market Internals: Advance/Decline, Up/Down Volume, New Highs/Lows, Market Divergences, etc., the signs are negative. Now that Monday’s action did little to clear the mud, we head into Tuesday with a similar course of action as we had last week-buy in the stronger sectors and groups if the market holds, short the weaker sectors if it doesn’t, and look for significant, high volume reversal patterns. Mainly, try not to drive yourself too crazy as my mom would tell you, “This too shall pass!”

S&P 500 (SPY) 198.25 would be good to clear otherwise, stay defensive and see if this confirms the warning.

Russell 2000 (IWM) 111.67 to clear helps-otherwise, 109.72 key

Dow (DIA) Tested the 50 DMA, held it and now decent close over 170

Nasdaq (QQQ) Tested the 50 DMA, held it and now decent close with 99.20 key to clear

XLF (Financials) Also held the 50 DMA-like QQQ DIA, if breaks the 50 DMA not good

KRE (Regional Banks) Best I can say is that this is holding August lows

SMH (Semiconductors) Also held the 50 DMA-like QQQ DIA XLF, if breaks the 50 DMA not good

IYT (Transportation) Also held the 50 DMA-like QQQ DIA XLF SMH, if breaks the 50 DMA not good

IBB (Biotechnology) Better shape then the others mentioned over the 50 DMA. Strong group.

XRT (Retail) Nice reversal off the 200 DMA but has to clear the 50 DMA

IYR (Real Estate) Inside day on the 200 DMA-very interesting

USO (US Oil Fund) Ran to the 50 DMA-no position-more interested to see what it does from here

OIH (Oil Services) Inside day

XLE (Energy) Inside day under the 200 DMA

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs showing defensive market action