August 26, 2015
Mish's Daily
By Mish Schneider
Wednesday finally brought us some positive action for the week, but Thursday is now set up to be an important test for bulls in several sectors of the market.
The main indices gapped higher for the open and proceeded to sell off with some volume. However most held at Tuesday’s lows, and unlike every other day this week, they close in the top of the day’s range.
The SPY and DIA and many sector ETFs closed with inside day patterns. The Nasdaq (QQQ) managed to break out of Tuesday’s range just before the close, making it the best looking
The Inside Day Pattern (when an instrument trades inside the range of the day prior) can be very strong under normal circumstances as once the instrument breaks the outside day’s range, it generally follows through in the direction it breaks.
So if the SPY, DIA, and IWM can break out over their Inside Day highs then we could see a nice move to the upside. Plus, the same can be said for many key ETFs as you’ll read below.
This makes Thursday a very pivotal in determining the likelihood that at least a short term bottom may be in place. Watch for leadership by the QQQ, IBB and XRT.
Of course, if the Inside Day lows are broken then new lows may be next.
Another noteworthy point from Thursday’s action was how well the Modern Family held up.
Brother Regional banks (KRE) gave an inside day closing near the highs. If KRE can close over 40.60 on Thursday then we have a confirmed reversal.
Big Brother Biotechnology (IBB) sold off early in the day and managed to rally back near the highs for the close. Most interesting is that a break above yesterday’s high would put it above the 200 DMA and out of its bearish phase. Watch Big Brother for signs of bullish leadership.
Little brother Semiconductors (SMH) also gave us an inside day and closed at the highs. No pattern here but nice all the same.
Granny Retail (XRT) had an inside day as well but really needs to get a close over 91.00 before we get a bit more positive.
Sibling Transportation (IYT) held at Tuesday’s lows for an inside day, but still can’t seem to decide where to go next. For this to be good though we need to see a close over 141.27.
This isn’t to say the markets are out of the woods. More to the point that when you see patterns forming in a volatile markets, they should be respected and watched closely.
S&P 500 (SPY) 2 inside days now over 195.84 looks much better.
Russell 2000 (IWM) Closed near the highs. Now needs to clear 113.63.
Dow (DIA) Inside day hear as well with 163.68 the place to clear. I would also like to see this hold 159.28.
Nasdaq (QQQ) Broke out just before the close. Needs to hold 97.87 and really clear and close over 103.32.
Volatility Index (VIX) Failed to hold the 200 DMA at 24.42 so now back in an unconfirmed recovery phase.
XLF (Financials) Inside day with strong support at 23.08.
KRE (Regional Banks) 2 inside days now with some resistance at 40.48.
SMH (Semiconductors) Looking better but still not out of the woods until we see this over 49.72.
IYT (Transportation) 2 inside days. Now needs to clear 140.26 to get back on track.
IBB (Biotechnology) Needs to clear the resistance at 343.01 the 200 DMA.
XRT (Retail) 90.31 now support to hold if this is any good.
IYR (Real Estate) had an inside day. 68.23 is the next support.
XHB (US HomeBuilders) Unconfirmed phase change to warning. Needs to hold 35.59 for tomorrows close if it wants to confirm.
GLD (Gold Trust) Gapped under the ten and fifty DMA’s. Back to looking very weak.
SLV (Silver) Can you say crushed? New 2015 low…
GDX (Gold Miners) 13.00 is the line in the sand to hold.
USO (US Oil Fund) 12.37 is the all-time low in this instrument. Let’s hope it stays that way.
XLE (Energy) Inside day
UNG (US NatGas Fund) 12.28 the 2015 low to hold
TAN (Guggenheim Solar Energy) Still trying to move back up. Yet has resistance between 30.61 and 30.95.
TLT (iShares 20+ Year Treasuries) Trying so hard to hold the weekly moving average at 121.70.
UUP (Dollar Bull) Testing the 200 DMA at 24.92.
EEM (Emerging Markets) Inside day
EWI (Italy) Unconfirmed phase change to warning.
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