The market is like a mouse trap, it always.

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Note: Tonight’s evening watch was written by Jonathan Griffin Assistant Director of trading education and research.

The Calm after the Storm

The market winds calmed with Friday’s action. Muted by comparison to the rest of the week with the markets mostly closing flat after testing overhead resistance at the 10 DMA in each of the indices. The Russell 2000 (IWM) showed the most leadership closing up just under 1% on the day.

This is really no surprise though after such a volatile start to the week and the subsequent rally that ensued. With the market going from down 1000 points to closing up for the week we would assume on at least one day of rest

So where do we go from here?

For months the media has been fond of blaming oil’s decline for putting pressure on stocks. After 8 consecutive down weeks, USO reversed with a massive weekly reversal pattern powered by a 14% rally in the last 2 days!

Let’s see what the media has to say now. Good for stocks?

Earlier this week we encouraged you to keep your eye on IBB for leadership, and it closed the week at last Friday’s highs with the last two days over the 200 DMA. Encouraging?

Reason to be cautious.

The QQQ actually closed up almost 4% for the week!

However, even with the move back up from the lows this week the longer-term market momentum still seams bleak.

The S&P (SPY) had its Death Cross (when the 50 DMA trades under the 200 DMA) during Friday’s session and is now trading in a bearish phase. This just leaves IWM and QQQ trading in a distribution phase as the Dow (DIA) was already in a bearish phase.

Also if you examine the slope of the 50 DMA in IWM and QQQ you will notice a severe downward trend forming and in IWM’s case the proximity of the 200 DMA implies that we will see the Death Cross there soon as well.

Longer-term momentum has a funny way of “unexpectedly” changing the direction of short-term moves. It reminds me of a famous quote,

“A mouse trap always provides free cheese”
- Anonymous

S&P 500 (SPY) Now trading in an unconfirmed bearish phase, with some resistance at 200.03.

Russell 2000 (IWM) Had the strongest move on Friday but until this clears 116.90 I’m not impressed.

Dow (DIA) Having trouble clearing the 10 DMA at 166.97.

Nasdaq (QQQ) This will be the last to go bearish considering the distance still between the 50 and 200 DMA’s,

Volatility Index (VIX) Now a confirmed accumulation phase with support at 24.40.

XLF (Financials) Inside day here after Thursdays move higher. Needs to clear 23.79 and then 23.93.

KRE (Regional Banks) Similarly to XLF we have an inside day here as well. 40.98 needs to clear for this to continue.

SMH (Semiconductors) Tested the monthly resistance at 49.81 but could not hold it for the close.

IYT (Transportation) Interesting to see this moving up at the same time as oil prices rise. 142.90 is the 10 DMA to clear.

IBB (Biotechnology) Confirmed the phase change back to warning. Now just needs to hold 343.58 to stay there.

XRT (Retail) Cleared and closed back over weekly resistance as well as its 10 DMA.

IYR (Real Estate) Inside day here. Lagging the market at this point.

XHB (US HomeBuilders) 36.47 still resistance at the 100 DMA.

GLD (Gold Trust) Starting to look better with an unconfirmed phase change to recovery.

SLV (Silver) Still working its way back from Wednesday’s gap lower. Over 14 looks much better.

GDX (Gold Miners) Starting to look like a double bottom formation with support at 13.00.

USO (US Oil Fund) Impressive move this week.

OIH (Oil Services) IP another 3.12% on Friday. Next resistance is at 31.97.

UNG (US NatGas Fund) Closed just shy of the 10 DMA at 12.87

TAN (Guggenheim Solar Energy) Looking better and better. Needs to clear 30.96 and its back in business.

TLT (iShares 20+ Year Treasuries) After gapping higher on the open this sold off but still held support at 121.68.

UUP (Dollar Bull) Confirmed the phase change to warning.

EEM (Emerging Markets) Inside day.

IFN (India Fund) 2 inside days.

EWP (Spain) Inside day.