Ordery Declines

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Today's Mish's Daily was prepared by Geoff Bysshe, co-founder of MarketGauge.

The The QQQ's are holding firm at their 10 DMA while the other 3 indexes have had nice orderly corrections. APPL certainly has had helped hold up the Q's, but don't give APPL all the credit. GOOG's been equally as impressive. Let's hope their happy shareholders don't need to raise any cash before the weekend!

Friday in August is not a great time to ask the market for much, and it's even more difficult to trust a move when it begins. We have a systematic way to determine the intra-day bias for the market, and it has worked perfectly for enjoying some short exposure at the top. So as tempting as it may be to think 3 days down is enough to become a buyer again, I urge you to follow your rules.

We've had some nice long trades in stocks even on the down days. I'll continue to look for long trades in stocks, and shorts in the indexes. Tomorrow I'd prefer to sell strength over weakness.

S&P 500 (SPY) 141 was pivotal today and is likely to be important tomorrow too. Our short-term bias is negative, but a move over 141 would be the first time I'd consider moving to a neutral bias. Today's high is the line in the sand for the bulls to declare a successful bounce off the 20 DMA.

Russell 2000 (IWM) Touched down into the top area of support created by the early August consolidation. The next support on the downside is the 20 DMA at 79.80. There's formidable resistance at 80.90 and today's high.

Dow (DIA) We've been shorting DIA for day's now as it has led the decline. It's now getting a bit oversold on an RSI basis. If it drops another 100 Dow points it will fill a gap at 129.30. This also lines up with the upper range of the June / July consolidation period so barring a rout tomorrow that would be my downside limit expectation. On the upside, I'd expect it to struggle at 130.65-.80 and today's high.

NASDAQ 100 (QQQ) Still the strongest index and refusing to break its 10 DMA. This is the wild card because it was the most overbought at the recent top and if it is going to work its way back to oversold we've got a big drop coming. That won't happen unless GOOG and AAPL get hit with serious profit taking. I wouldn't expect that on a quiet Friday in August.

ETFs:

GLD Still going up! Need to wait for a pattern to get involved. While it is a nice move quickly, it is still just getting back to its 200 DMA.

SLV Same story as GLD.

XLF (Financials) Sitting at the 10 DMA which is now at the 15.06 level we were calling a breakout just a few days ago. This should be good support, but if it breaks 15, the next level is 14.85.

SMH (Semiconductors) This could have very easily been the ETF disaster de jour, but it got a little help from Taiwan. INTC, weighs in at 19% of the SMH and it fell out of bed. Fortunately its second biggest holding, TSM, didn't have such a bad day. Now it sits right under the 20 DMA, and more importantly, right on top of the June highs. The 200 DMA and more support come in around 32.60 so if it doesn't hold today's lows the downside range is probably another 40 cents lower.

XRT (Retail) After holding up for the last few days, it finally succumbed to the bears. Now sitting on the 20 DMA.

IYT (Transportation) Sitting on the 200 DMA, but I'm not sure it cares about that. I don't see anything here.

IYR (Real Estate) The key range is 65.30 to 64.15 where a breakout over 65.30 should lead to new highs. Today it ignored the market and went sideways.

USO (US Oil Fund) Yesterday I said "35.90 is the short-term bull bear line in the sand. Until it breaks that level, let it continue to reach for the 200 DMA around 36.80." Well, today it repeated Tuesday's fear of heights around 36.40. The collapse from this level created a nice engulfing pattern and a three day pattern eerily inversely similar to the recent bottom I pointed out in TLT. I don't like to pick tops, but it closed under my 35.90 line in the sand, and I'd like the opportunity to short an OR reversal against that level.

OIH (Oil Services) With market weakness and the USO wipeout today, this didn't have much of a chance. 41.40, 41.55 and 41.75 are the key resistance levels. I'll wait to see where the selling stops. The big picture is still constructive.

XLE (Energy) Like OIH, let's see where the selling stops. It looks heavy, but there is good support at 70.70 and 69.50.

TBT (Ultrashort Lehman 20+ Year Treasuries) 3 nice down days in a row. A rest is deserved, but I'd still look for it to test the 15.40 level before this correction is done. If the markets finds any reason to seek safety in the TLT before the weekend any reversal of this week's trend may have to wait until Monday.