Like Trying To Nail Jell-O To A Tree

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As The World Turns

As the Phase turns or as I have written earlier this week, once the cycles begin the points of deterioration, in this case, simple physics-things in motion stay in motion-we get, well, what we saw during Tuesday’s session.

With NASDAQ marginally holding the 50 DMA and the bullish phase, one can assume that further deterioration will indeed impact the QQQs. Therefore, it’s those high momentum stocks, some of which have already had substantial declines that should erode further.

Therefore, we can also assume that the SPY and DIA will break the 200 DMA, IWM will match or take out May 2014 lows and then at some point, with majorly oversold conditions, an ensuing short covering rally will follow.

This year, the contrarian trader has flourished. Sell when instruments look strong, buy when instruments look horrid. I would maintain a mainly cash position at this time, with a delta neutral bias (under committed yet small net long and short positions and wait for the dust to settle.)

Looking out and when the volatility comes back in, I still see the future mega trends for the bulls in Regional Banks, China and Solar. But of course, timing is everything!

S&P 500 (SPY) It is interesting that the May lows also match the 200 DMA. Law of attraction.

Russell 2000 (IWM) Under 110, 108 is the May low area. Over 113 perhaps some new life

Dow (DIA) As with SPY, May lows match the 200 DMA only it’s there already. 160 are the April lows although this does also have oversold conditions

Nasdaq (QQQ) 94.00 is the 50 DMA. If that holds and this turns up on good volume, I will get more positive. For now, that line in the sand looks precarious.

XLF (Financials) May lows are under the 200 DMA-therefore, looking at 21.50 although oversold here as well

SMH (Semiconductors) Unconfirmed warning phase

IYT (Transportation) 142.90 is the recent June low

IBB (Biotechnology) July low 246 and back in an unconfirmed warning phase

XRT (Retail) Should this hold current levels and turn back over the 200 DMA, that would make this a place to go for longs when the market calms down

ITB (US Home Construction) This index is trading around the end of 2013 levels

GLD Converging moving averages and bias still negative at this point

XOP (Oil and Gas Exploration) 72.20 is real close and worth watching for support.

TBT (Ultrashort Lehman 20+ Year Treasuries) The more I read about the low Fed Fund rate as unsustainable, it’s here at the TLTs we have to look for that sign-still over the 50 DMA

UUP (Dollar Bull) Strong which means the equities that are impacted by a stronger dollar are well worth watching