What Was Scattered Gathers, What Was Gathered Blows Away

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Heraclitus

Many of my readers have attended at least one of the webinars we do on market phases. I begin each one the same way-talking about the cycle of EVERYTHING in nature, including the markets. I further comment that not understanding phases and what phase the instrument you are trading is in is like driving without a map or navigation system.

After a solid run in a bull phase with short periods in and around that phase, this now confirmed warning phase in the SPY and DIA, coupled with the Distribution phase in IWM does look more like the tipping point for further deterioration in that cycle.

Only NASDAQ with its solid hold of the 50 DMA and the bullish phase keeps that distinct possibility at bay. One other note is volume-typically on blow offs, you see double and triple the daily average volume. Such is the case last Thursday and Friday in all indices, particularly the SPY and QQQs.

What that suggests to me is 2 distinct possibilities at play-either NASDAQ joins the others in further weakening since the volume suggests more of a running for the exits rather than huge short bets, or, the QQQs are telling us that the better economic stats we saw last week are just part of a great rotation with a stronger dollar, firmer rates, which will lead us to have only tested the May lows in the IWM with now a new and wider trading range as we head into a much choppier August.

Regardless, we will know soon enough and while we wait for that clarity, market tone says delta neutral with no real edge to holding major swing trades long or short.

S&P 500 (SPY) 2 big volume days and confirmed warning phase. Now, has not filled the runaway gap so that’s noteworthy

Russell 2000 (IWM) Landed on key weekly moving average support-might see short covering, but lots of damage done

Dow (DIA) Officially down on the year and way oversold

Nasdaq (QQQ) 93.80 is the 50 DMA (Friday’s low 94.04) and the place most likely to be somewhat a bottom for the other indices at least temporarily.

XLF (Financials) 22.00 is where this began 2014

SMH (Semiconductors) Closed green which is no surprise considering this is the top place to look since it is resting on the 50 DMA, 48.94 and ended the week with an inside day.

IBB (Biotechnology) Sitting just under the 50 DMA

XRT (Retail) In terms of distance from the 200 DMA, this too is close

GLD Gapped over the major moving averages on Friday after gapping lower on Thursday-confused little metal

USO (US Oil Fund) Subscribers: Just missed an official slingshot low but did see the move back over the 200 DMA from the lows. Keep watching

XOP (Oil and Gas Exploration) 72.16 the 200 DMA which could turn out a gift as fas as a low risk buy is concerned

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs remain above the 50 DMA even with the taper-flight to safety which is kinda weird since firming rates getting blamed for correction-so probably temporary