May 19, 2011
Mish's Daily
By Mish Schneider
Today I was grateful for WTW. Although we have had some really good trades lately, they have been mostly mini swing trades. Today's trade was one of those rare occurrences of late where we comfortably bought strength, did not have a moment of pain, and even reached our first mini swing target before closing beyond that point up 3.06%!
SPY closed well and above the adaptive moving average but still cannot give us an Accumulation day in volume. I would also like to reiterate that two days ago SPY tested not only the 50 day moving average but also the bottom of a ascending channel. If we remove volume from the equation, then we can look at this as good follow-through off of the key reference points confirmed with a close above the adaptive moving average today. The price point is now 1/3 into the channel with a lot more room to the upside. At this moment in time, the top of the channel comes in at 140. If I isolate all other factors and just look at how prices move through channels, it looks bullish.
Here's what I saw on twitter "Pessimism Among Individual Investors Hits 9-Month High." And that is with all the indexes off their 52-week highs by 2%. The last time sentiment was this bad was in August of 2010, right before one of the most profitable times we've had catching the huge move from September until December. Of course, QE2 had a lot to do with that. I interpret this recent downturn of sentiment as good news and bad news. The bad news is that we are experiencing unsustainable rallies and choppy market conditions with extremely light volume. The good news is that we are only 2% off from 52-week highs which means it's very possible that investors might do what they typically do-after being the first ones to get out will now be the last ones to get in. With just a slight calibration of sentiment and psychology, this market could really get moving.
This doesn't change a thing concerning my recommendation of keeping it light, selling into rallies and looking for buy opportunities with minimal risk, but since psychology is such a huge part of trading, it is interesting nonetheless.
QQQ failed to get above the adaptive moving average, but did not retreat very far. Volume was light.
IWM confirmed back into a bullish phase. A move and close above 84.31 will look pretty compelling in the mid-caps. Therefore at this point in time, unless something dramatically changes tomorrow, it could be getting close to party time.
Other ETF's: SMH** had a DOJI day closing right above the adaptive moving average at 36.08. Although the daily chart is a bit sloppy, 36.13 the open and closing price now becomes pivotal. And of course, a close above 36.75 will be a new all time closing high.
GLD** Considering we closed with a bullish engulfing pattern to yesterday's DOJI day, looking for an entry tomorrow.
SLV** Had an inside day. Now the last two days range becomes clarifying and critical.
FXE today this went right up to the 50 day moving average and closed beneath it. A gap above 142.71 today's high, will certainly weaken the dollar further.
What does look different than the last rally we've had in the indexes is the oil service and energy ETF's-OIH and XLE. They are both in warning phases and both with downward sloping 50 day moving averages. They also both tried to rally above the adaptive moving average and have been unable to do so. Therefore, logic dictates that if the market strengthens look to the groups and sectors that are performing well such as semiconductors, retail, biotechnology. And if the market weakens, look to the oil, energy, and industrial metals to go short.
Also, FAZ** is still holding the 50 day moving average at 41.04. Another place to go if the market weakens as the financials are also a lagging sector.
Every day you'll be prepared to trade with:
