May 22, 2011
Mish's Daily
By Mish Schneider
Needless to say, damage was done on Friday with SPY closing down 1% with another Distribution Day in volume. But, the channel is intact, the slope on the 50 day moving average still up. The internals are weak, the chart formation still positive. When signals are this mixed, our stance of smaller positions and quicker exits has been the most prudent to date. And, there were some counter movers Friday-making the situation more of a-follow the leader of the day, get in and get out-scenario.
SPY 50 DMA comes in at 132.64-slightly beneath the channel line. One possible scenario is that we hold Friday’s low or go beneath it slightly and see the index rally or at least hover with an inside day. Another is we gap lower and test the 50 DMA and channel line. Remember that often if a channel breaks down and then the price retraces through it-we could get a good entry with low risk. But, I am keeping my sentiment from last week very much alive-until we see an Accumulation Day in volume-market commitment to long side remains short term. But, on the other hand, until I see the chart pattern confirm the weak internals-not committing to the short side either.
QQQ looks similar to SPY-still in a positive phase with a Distribution in Volume. IWM once again, the exception. From a confirmed bullish phase, back to an unconfirmed warning phase. And with a upward sloping 50 DMA and Distribution Day in volume.
Looking at ETFS: GLD-which was a featured pick on Friday-held Thursday’s low and then took out all the points we were waiting for-R1, the 30 minute opening range and ended just beneath the adaptive moving average. A gap above 147.81 is compelling-otherwise, watch for support around 146.25 area.
SLV-outperformed the market, but if the market remains weak, could easily see this break down further with underlying support at the 200 SMA or 28.60 area. Now, has to clear 34.70 to get a rally going back up to 38-the 50 DMA.
IBB held up as biotechs have been strong for quite some time.
SMH fell but outperformed the market. Almost had an inside day, breaking Thursday’s low by 2 ticks and closing a bit better. Again, will focus on this group if market recovers.
XLE and OIH held up-but still very much in a warning phase with a downward sloping 50 DMA- In the near term, can use the adaptive moving averages a signal to follow-if they can rally above, a sign of recent price levels basing, but otherwise, an indication of more weakness with a test of the 200 DMA more likely.
FAZ-Another featured pick to follow in weakness-had a great opportunity Friday to buy over the pivots and 30 minute opening range. Not quite up to last week’s high, will now look at 43.85 as either resistance should market regain strength-or the next area to penetrate for another leg up.
Every day you'll be prepared to trade with:
