March 17, 2013
Mish's Daily
By Mish Schneider
From an older issue of the daily, here are the 4 signs of a top once again 1. Blow off rally with huge volume, 2. Slingshot patterns, 3. Island tops or, 4. Two or more tops made at resistance areas. Last Thursday night I wrote about 4 possible scenarios, one of which was that the Dow does not make it to the 2007 high after a valiant effort, then begins its descent. Friday, if you combine the 4 signs of a top with the 4 possible scenarios after a 10-day rally, the one that nags at me is the possible island top in the S&P 500.
If you look at the daily chart, the gap up from last Wednesday's high followed by the gap lower on Friday, leaves that possibility. However, like all fresh signals, it needs confirmation. Therefore, although the S&P 500 was the only index to have this possible formation, it is worth noting unless Monday proves to the contrary.
S&P 500 (SPY) The 2007 high was 157.52. Thursday's high was 156.80. A break and close under the fast moving average, 155.20 would not be a good sign. Plus, it needs to close the gap to Thursday's low 156.22 to negate that island top.
Russell 2000 (IWM) 93.75 remains pivotal as this index held up well and as the 2013 leader, makes the performance in the SPY a bit less suspect. However, in 2011, the last time SPY made an island top, Russells held up for a day or two, then collapsed.
Dow (DIA) No island here either and some underlying support at 143.65.
NASDAQ 100 (QQQ) 69.00 has to clear and 68.00 has to hold. This range is holding tight for now and a good confirmation on whether it's island top or just a breather in the rest of the market.
ETFs:
GLD Lots of congestion to clear over 154.70 for this to make a move higher.
XLF (Financials) 18.20 is first area of support to watch for a hold if this is going to continue a bull move.
IBB (Biotechnology) One sign of a potential rollover is a slingshot high. If this confirms, another big warning sign
SMH (Semiconductors): Just couldn't get through 36.00 with a potential brick wall pattern. Then, we will be looking at the 50 DMA to uphold the bull phase.
XRT (Retail) Filled the gap from Thursday. Like to see how a second day of either correction or resumption turns out to help complete the puzzle.
IYT (Transportation) Failed to clear 112, but unless it breaks 109.85, was just a healthy digestion
IYR (Real Estate) Held up with an inside day but has to clear 69.50 to negate the possible top on 03/06.
USO (US Oil Fund) Confirmed phase change to accumulation with doji hammer.
OIH (Oil Services) Peeking its head over an important moving average on a monthly basis and if holds could be a longer term bottom in place.
XLE (Energy) Got through 2013 highs and closed on the week with an inside day.
TBT (Ultrashort Lehman 20+ Year Treasuries) 68.00 area has to hold as this continues its basing action.
XOP (Oil and Gas Exploration) As one of my favorite sectors this year, now trading at the top of a trendline going back to 2008.
XHB (Homebuilders) Still has to clear 30.00
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