Rather Than Pick The Top Day, Do This

February 11, 2020

Mish's Daily

By Geoff Bysshe

Today, the markets got off to a strong start and then consolidated lower in a very orderly way.

As a result, today was basically a consolidation day that happened to also touch new highs in several markets.

If I was looking to pick the top day for the week then maybe I’d say today was the top for a while in the DIA. I could justify that idea with a description of today’s action as a bearish attempt at a new high that failed.

However, that’s a dangerous way to look at the market. It will get you in trouble by reading too much into one day’s action.

There’s a better way.

You’ll see in my comments about the individual ETFs that I look for ranges to watch and put more weight on them than single days.

I let the markets consolidate for at least 2 days, and preferably 3-5 days before I start thinking about a trend change that’s worth changing my bias.

For example, right now…

The SPY broke out of a 3-day range yesterday and today moved higher. There isn’t a clear range yet. The same can be said for the QQQ. Be patient.

On the other hand, the DIA has a pretty clear 5-day range from today’s high down to 290. Picking today as a high day is just saying that it won’t get through the resistance that we can already see. That’s one reason I used it as my example above.

I also know that our Real Motion indicator is set up in such a way that if the DIA starts to head lower (under today’s low and under a 30-min. O.R.) tomorrow, there’s a good chance it will have a trend down day.

Finally, IWM is stuck in a 5-day range. If it breaks the low of its range it will also be breaking its 50-day MA. That would be bearish, and a reason to anticipate more downside.

Until these ranges start breaking. I’d give the major trend the benefit of the doubt, and not try to pick the top day.

Be patient.

Today's commentary was written by Geoff Bysshe

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S&P 500 (SPY) Closed at new all-time highs. 330 is pivotal with support at 327.87 

Russell 2000 (IWM) Range to watch the 50-DMA at 164.68 to 168.

Dow (DIA) Hit all time high, then faded. 289 is the underlying support to watch.

Nasdaq (QQQ) Another move to new high, then faded. Must hold 228.

KRE (Regional Banks) Range to watch is 10-DMA, 55.36 to 57.36.

SMH (Semiconductors) Strong move that closed well. New highs are at 150.74.

IYT (Transportation) Compressing. 193.48-197.30 is the range to watch.

IBB (Biotechnology) Consolidation right under new high range. One of the better-looking sectors right now.

XRT (Retail) Watch that low 42.90 to hold and if can get back over 44.05 and hold, better

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