Storm Clouds Rolling In

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

Candle chart readers will call them bearish engulfing patterns across the equity indexes.

Just days ago I wrote that I was waiting for all the major "market watch" indexes to close under their prior day's low to declare that it's time to stop going up relentlessly. Well, bearish engulfing is not the same, but...

Today's market action reeked like the odor of an apple orchard in late fall where you know the cider will taste good, but the you also know the smell to be that of the end of a season.

There may still be some summer days left, but if you were in the trading room today you know I jumped on the short bandwagon early, and today's list of stocks will reflect a two way market for the first time in a while.

Fortunately for this market, a correction will attract buyers faster than insiders can sell their FB stock so I look forward to any market correction we can find.

I'll be more convinced that the market is ready for a break when we get closes below the prior daily low, but for now the red flag is raised with the DIA closing below its prior day low and the other three experiencing bearish engulfing patterns on a wide range day.

I'd like to hear what you think too!

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S&P 500 (SPY) I don't want to over analyze this. 141 is the big support level. That's what I said yesterday and it's still true.

Russell 2000 (IWM) We followed it up today for a nice trade as planned. Took out some profits and let it come back. It's still in good shape. Let it consolidate as long as it holds 80.50.

Dow (DIA) 133.14 is the 2012 high, and while the SPY broke its high the DIA could not. Then it closed under the prior day low. I'm short. Subs - watch the pivots closely.

NASDAQ 100 (QQQ) The last 3 days form a broadening wedge that is a pattern that rarely ends well for the bulls. 67.85 is the key support and a close below that would be bad.

ETFs:

GLD Big break away gap over the 158 level we've been focused on. Sometimes you miss the worthwhile entries due to gaps like today. Be patient for an entry over 158.

SLV Just like GLD, nice break away gap. The 10 20 and 50 DMA are now ready to catch any retracement. If your long, take some profits against 29. If you're looking to get long wait for the pull back to 28 or 27.50.

XLF (Financials) Was a leader early today boosted by an impressive day by JPM. It pulled back but this is still a place to look for long trades, not short.

IBB (Biotechnology) Nothing remarkable going on here. If the market gets weak, we'll look to see if this group finds buyers.

SMH (Semiconductors) The upside looks great if it can clear 34.00. But until then stay clear.

XRT (Retail) Should hold low at 60.79 or 10-day MA at 60.60.

IYT (Transportation) Stopped dead at the trend line from the 2012 highs I mentioned yesterday. Look for support around 92.

IYR (Real Estate) The key range is 65.30 to 64.15 where a breakout over 65.30 should lead to new highs, but if the general market corrects this has a bearish flag that begins to breakdown at 64.60.

USO (US Oil Fund) Just missed our target of 36.50 level on the open and then sold off to close on the low of the day. Today's bearish action suggests it needs a rest.

OIH (Oil Services) Held up very well today. As long as it holds over 41 is an area to look for long trades. But beware of XLE, if it's falling wait on your long OIH.

XLE (Energy) Big resistance at 72.77 - 73.00. Draw the resistance line from the July 2011 highs. Bearish engulfing pattern. Look for it to move lower if it trades below 71.88.

TBT (Ultrashort Lehman 20+ Year Treasuries) TLT's are sitting on their 200 DMA with a very interesting reversal pattern over the last 4 days. Expect TBT to head lower.

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