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Mish's Daily: Is The Market Entering A New Range

October 10, 2015

By Mish Schneider

This week saw the start of earnings season with Alcoa (AA) and with the markets trading back to the highs of their recent range the question becomes, what will it take for more upside?

We have discussed the possibility that the markets would continue to trade in a narrow range between the August lows and the September highs. Thus far the markets have rallied near the September highs, with the exception of the Russell’s (IWM) which has yet to revisit the September high at 118.89.

However at this point, the markets are reaching an overbought state. This can be seen in the up down volume indicator as well as the overall market breadth.

Overbought and with SMH as the only one member of our Modern Family trading over its September high, the charts suggest a correction to the downside is needed. So keeping the markets up may be a challenge.

So just what will it take to get more upside?

The charts are our guide, but earnings season can dramatically change the charts. Ironically, the best news about the upcoming earnings season may be that earnings are expected to be weak! This is good news in a weak market because markets move based on how reported earnings compare to expectations.

With stocks near the top of their range and in a bearish trend, they look like they’ll need some nice earnings surprises to move higher.

Unfortunately, they also look poised to drop quickly if they don’t provide traders with positive surprises.

So with that said, watch for earnings dates, expect more volatility to drive the markets, up and down, and use caution when trading around earnings.

S&P 500 (SPY) Confirmed phase change to recovery. September 17th high 202.89 still strong resistance.

Russell 2000 (IWM) Cleared the 50 DMA for an unconfirmed phase change to recovery. Now needs to hold over the 50 DMA at 115.57 for a second day to confirm.

Dow (DIA) Continued to rally, next major resistance is at the 100 DMA at 173.09. Still has a negative sloping 50 DMA at 167.23 making that the support level to hold.

Nasdaq (QQQ) Had the second close above the 560 DMA confirming the recovery phase. Support now at 105.92.

XLF (Financials) Backed away from the 50 DMA yet managed to hold Thursdays low.

KRE (Regional Banks) Tested and failed the 100 DMA at 42.77. Strong support at 41.49.

SMH (Semiconductors) Had an inside day just under the 100 DMA at 52.85.

IYT (Transportation) Still approaching the September high at 149.86. Big eye’s here for that level to clear or fail!

IBB (Biotechnology) 310 pivotal, still…

XRT (Retail) 46.58 the 50 DMA resistance, with 45.50 support to hold

IYR (Real Estate) Took a day to digest the recent move. Still slightly overbought.

ITB (US Home Construction) Closed over the 50 DMA for a second day confirming the phase change back to bullish with an inside day.

GLD (Gold Trust) Strong move over the 100 DMA.

GDX (Gold Miners) Cleared and closed over the 100 DMA for the first time since May. 15.79 should be good support now.

USO (US Oil Fund) Into some resistance here so waiting for a dip closer to 15.00

OIH (Oil Services) Tested and failed to clear the 100 DMA at 32.32.

XLE (Energy) Inside day.

TAN (Guggenheim Solar Energy) Took a day to rest after confirming the recovery phase.

TLT (iShares 20+ Year Treasuries) Inside day just under the 50 DMA at 122.69.

UUP (Dollar Bull) 25.00 resistance. 24.60 support

CORN (Corn) Sold off hard yet held the 50 DMA.

DBC (DB Commodity Index) Looks good

SGG (Sugar) Confirmed Accumulation Phase