It's Simple, If It Jiggles, It's Fat

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Arnold Schwarzenegger

I’m so excited since after giving you a head’s up to follow the range break of the inside days in both IWM and QQQs, the market has given us a gift-2 INSIDE DAYS!!! (Well, technically not quite in QQQs since it took out Wednesday’s high by one tick.)

However, even more powerful than one inside day, two inside days should be statistically more reliable vis-à-vis following the range break up or down.

I also wrote about public perception of low Treasury bond rates and how it wavers between a Dr. Jekyll/Mr. Hyde scenario. If you followed the TLTs on Thursday, as the rates firmed a tad, the Dow climbed over 200 points. As the rates fell, the market gave back 110 of those points. Finally by end of day, the rates dropped further with TLTs making new intraday highs. The market pared its gains even more with the Dow closing up $62.00.

Therefore, seems to me keep it simple. 2 inside days-keep your eyes on IWM first, QQQs second. And, don’t necessarily count on a low volatility, dull Friday. As I have written over and over again this entire year, throw out most conventional wisdom, (December is strong with super low volatility) and think The Year of the Contrarian Horse. December could easily remain weak with continued high volatility (last 2 days volatility jumped 20%). At least until we begin counting sheep on the next Chinese New Year.

S&P 500 (SPY) 206.73 is the overhead 10 DMA to pierce for this to get exciting. Otherwise, not quite the inside day as IWM had, but, under Wednesday’s low, trouble ahead.

Russell 2000 (IWM) After 2 inside days, if breaks lows see 200 DMA pretty readily. If holds and clears 118, great sign

Dow (DIA) 178.12 area to clear or looks like SPY-under Wednesday low, the 50 DMA looks like next landing place

Nasdaq (QQQ) A move over 105.06 positive. Under 103.59 vulnerable and under 103.04 not pretty

XLF (Financials) 24.55 held Thursday and remains pivotal at the fast moving average.

KRE (Regional Banks) Inside day above the 200 DMA

SMH (Semiconductors) Support at 54.00 and over 55.55 much better

IYT (Transportation) Still has not filled a gap from Monday. Vote for first one to reach the 50 DMA below

IBB (Biotechnology) 2 Inside days here too-now that’s special!

XRT (Retail) Couldn’t quite make the hold over 92.50. Now, either gets there again and holds or vulnerable

IYR (Real Estate) Quiet but firm

ITB (US Home Construction) Not an impressive candle with its inside day

GLD (Gold Trust) Friendly near term unless it cracks under 115.75

GDX (Gold Miners) Confirmed phase change back to bearish.

USO (US Oil Fund) Really oversold on all timeframes. So what for now.

XOP (Oil and Gas Exploration) Didn’t make a new low, but did make a new low close

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 123 now near term support