March 11, 2012
Mish's Daily
By Mish Schneider
Today's report has been prepared by Geoff so Mish could take a much deserved long weekend...
Basically unchanged for the week!
If you look at the 3 of the 4 stock indexes - SPY, QQQ, and DIA they ended right about where they started.The IWM closed nicely higher - up 1. 7%, but that does not tell the real story.
All experience the deepest correction they've seen all year only to quickly recover. This leads us to ask the age old question of - was it a healthy relief of excess enthusiasm or the first hint of a bigger problem to come for the bulls.
The answer is not yet unanimous...
NASDAQ (QQQ) The only index to not only reach a new high on the year, but also achieve a new closing high. There is no reason to expect the Q's to give up their leadership position so the bulls should look for the Q's to hold above Friday's lows (64.82) and then the 64.50 area where you'll find the 10 DMA and a 3-day pivot low. Don't assume Friday's high will easily be taken out however. 6 of the last 8 days have a daily high between 64.94 and 65.12 so this area may serve as significant resistance if the market gets caught below it.
S&P 500 (SPY) The late February high of 138.19 is the key number to clear for the upside, and support should be anticipated at Friday's lows and the 10 DMA of 136.86.
The Dow (DIA) The DIA has the dubious honor of being the only one for the 4 indexes that had its high of the week put in on Monday rather than Friday, which suggests that if the market is going to head lower we may see it here first. A break below Friday's low, 128.94 will also put it back below negatively sloped 10 and 20 DMAs. That's your first red flag to watch out for. The next key level of support is 128.50.
Russell 2000 (IWM) Despite the IWM's ability to outperform the SPY and Q's by a factor of 3x (+1.7% vs. +.48%) it still could not close near its high for the year or even over its negatively sloped 20 DMA. Like the DIA, weakness may show up here first. Key levels for it to hold are 81.00 and around 81.70. Expect resistance at Friday's highs of 82.15 as well as 82.40 and 83.00
ETFs:
GLD Very strong recovery from a very weak open. Subs: Looking for the momentum to continue to give us our 1.5 ATR target.
XLF (Financials) It squeaked out a second weekly close over the 200 week moving average, an average it has been below since Nov. 2007! Let's see if it can move away from the 14.80 level that has held it down for the last 4 weeks.
IBB (Biotechnology) After a big up day Thursday, Friday was a rest. A move over 120.10 takes out an important trend line from the February 2012. A close above this trend line should grab the attention of swing traders.
SMH* (Semiconductors) Stopped dead in its attempt to break above its 20 DMA. The Q's have managed fine without any leadership from SMH thus far, however a rollover in SMH from this level may be an important warning sign for the bulls. On the other hand, if the SMH stocks can move higher they have the consolidation for a good move that would easily support continued outperformance by the Q's. Friday's range may be pivotal.
IYT (Transportation) Remains in a weak warning phase until it clears or fails from the 50 DMA. Friday's doji with a high at the 50 DMA and the trend line from the Feb. highs makes Friday's range a pivotal day for the next swing's direction.
IYR (Real Estate) Very tightly compressed. With the exception of six pennies on Wednesday, this has traded for 11 days within the range of Feb 23rd. Since it didn't breakdown with the rest of the market early this week, it's a good candidate for a sizable move higher if it breaks over 61.
USO (United States Oil Fund) 41.32 is an important resistance level and for all intents and purposes is held it down on Friday. A break above Friday's high creates a good path to a target of 42.
TBT (Ultrashort Lehman 20+ Year Treasuries) Late day weakness turned a strong day into a possible reversal from near the top end of the daily range. It's back into the sloppy middle of the range so it should find support above 19.20, but it would be best for the bulls for it to happen Monday or it will look heavy again. Regardless, the big picture still looks like a bottom.
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