Now That Ain't Working, That's The Way You Do It

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Dire Straits

Last Thursday night I checked the market before going to bed, saw it was down 12 handles, poured myself a nightcap, then tried hard to sleep fitfully to no avail.

Lo and behold, I awake Friday morning to see that not only did the market roar back before the open, but then proceeded to run up and close up 185.66 points in the Dow! Money for Nothin’ and Chicks for Free.

What really happened? I wish I could say peace broke out. Instead, let’s measure technical progress via the phases. The Small caps-an inside day under the 200 DMA-no change to the distribution phase. NASDAQ-an inside day, over the 50 DMA or bullish phase, leaving a range break to follow with relatively strong confidence to follow through on Monday. The Dow and S&P 500, remain in strong warning phases yet broke the range from last Tuesday through Thursday, but could not clear their last Monday’s highs.

Inside days are very often gifts for the technical trader. As the phases did not change at all last week, and in the cycle, they do appear to be deteriorating, we nonetheless have to respect the inside day and the strength in NASDAQ, weakness in the Russell 2000s. A break of Thursday’s lows, really, should seal the fate. A break above and we have to look at overhead 50 DMAs in DIA and SPY, plus the overhead 200 DMA in IWM as the real test and measure of the current tone: near-term neutral, intermediate term bearish.

S&P 500 (SPY) If it clears 194.40 good chance we will see the 50 DMA but if not, and rolls under 191.50 area, trouble again

Russell 2000 (IWM) Inside day. The 200 DMA still looks pretty far so calling this a rally towards resistance

Dow (DIA) The best news here is that last Thursday it made a new 60-day low on the 200 DMA and then roared on Friday leaving a strong possibility of a reversal off the lows that can last. But, that needs to confirm

Nasdaq (QQQ) Inside day and above the 50 DMA-not a wow, but then again, at least its holding in a bull phase.

XLF (Financials) Right to the 50 DMA resistance on Friday. Let’s see what this has if anything

KRE (Regional Banks) Meager Inside day

SMH (Semiconductors) Meager Inside day as well

IYT (Transportation) Calling this neutral

IBB (Biotechnology) Looks better pushing up against the 50 DMA

XRT (Retail) Now a really wanna be bull chart formation!

IYR (Real Estate) Unconfirmed bullish phase

GLD Inside day

Metals and Mining (XME) Has to take out 43.00

USO (US Oil Fund) Unconfirmed Distribution phase

XOP (Oil and Gas Exploration) 75.50 now key to hold

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs –Possible top? Said that before, but one day it will be true