New Cracks In The Bull Market Are In Plain Sight

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Stay out of trouble by watching these two key chart formations

Today's commentary was written by Geoff Bysshe, co-founder of MarketGauge.

If there was any doubt that the market is still addicted to central bank stimulus, this week made it clear that stocks do not suffer disappointing central bank news lightly.

Our Fed’s “as expected” announcement was uneventful, but the BOJ’s refusal to announce new levels of easing as expected sent global markets lower.

While the week’s slide may seem inconsequential, there are some potentially serious weaknesses in the bull trend developing as a result.

In addition to this commentary I’ve prepared this week’s Market Outlook video with more detailed analysis of the general markets and sectors including our Triple Play and Real Motion indicators.

There are two major conditions to focus on.

1. The QQQ has now broken both its 50 DMA and 200 DMA. Until the markets trade over their prior day highs this market should be viewed as going down.
2. For the first time since the current rally began in February, the SPY, QQQ, and DIA closed under the prior week’s low. If the market breaks last week’s low this will be a confirmation of a potential weekly reversal.

The QQQ is leading the market lower, but the IWM has been leading on the upside and remains in a healthy corrective mode.

As a result, a reversal to the upside in strong areas of the market can be followed, but until such a reversal occurs the market is in a corrective mode.

S&P 500 (SPY) Stopped at 205 as Mish suggested, next key support levels are 202 and 200. On the upside, 207 and 207.50 are important levels to break and hold in order to get bullish.

Russell 2000 (IWM) This is the leader to watch. Friday’s range can be used as the range to break to determine the next direction.

Dow (DIA) Look for support at 175 and 174. Key level to break to move higher is 178.33

NASDAQ 100 (QQQ) This is the leader of down days. The first sign of strength is a break and hold over 106.70. Next level of support is 103.50 area.

Volatility Index (VIX) If you want to play the market’s down side, this is set up nicely with a stop under 16.20.

XLF (Financials) Held nicely at the 200 DMA and prior swing highs. If it’s good it should hold Friday’s low.

KRE (Regional Banks) Back under the 200 DMA, but the key number to hold is 40. Resumption of the up trend begins if it breaks 40.70.

SMH (Semiconductors) 53.70 was a huge level of support and it’s not well below it. So now it’s likely to be a ceiling. 52 is a big area now that Friday’s low, the 200 DMA and 100 DMA are all in the area.

IYT (Transportation) Stopped right at the 140 level Mish mentioned. Friday’s range can be used as the range to break to determine the next direction.

IBB (Biotechnology) Failed to hold the 270 level, but stopped around the 50 DMA. Friday’s range can be used as the range to break to determine the next direction.

XRT (Retail) Failed to hold the important level of 44.50, but Friday’s range can be used as the range to break to determine the next direction. The next big support is the 43 area.

IYR (Real Estate) Nice late day bounce off the 50 DMA level around 75.70. Keep an eye on this one if the market moves higher.

GLD (Gold Trust) Big breakout. I wouldn’t chase it. There will likely be more upside in the future that you can catch with more definable risk.

SLV (Silver) Higher again. Very extended short term.

GDX (Gold Miners) Still running and nearing the 200 week DMA for the first time since it broke below it in 2012! That breakdown was at double today’s prices.

USO (US Oil Fund) Current level of 11.40 should be resistance. Next resistance level is 12.25. Should be good support at 10.80.

TAN (Guggenheim Solar Energy) 25.20-.30 is huge resistance and it’s no longer benefiting from higher oil prices. Looks stuck.

UUP (Dollar Bull) 24.20 low of 2015 is broken. 24.40 will now be big resistance with the next big support all the way down at 23.15!