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Mish's Daily: Are the bulls defiant or ignorant?

September 2, 2015

By Mish Schneider

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

Signs of strength, but the big picture is…

In the pattern of large swings, the market opened on Wednesday with a strong move to the upside. True to the current market, rather than follow through, we saw a day of chop before buying in the last half hour of the day gave breakouts to the upside.

With the S&P 500 (SPY) closing up 1.8% from yesterday and the Nasdaq (QQQ) closing up 2.86% we question whether this move will continue or fail.

On a positive note, we finally got a close in Nasdaq (QQQ) over the 10 DMA that has been strong resistance for the indices.

Additionally, Biotechnology closed up 3.87%, clearing back over its 200 DMA to give us an unconfirmed phase change back to warning. Big Brother (IBB) is one that we look to for leadership, so keep an eye on it if you’re looking for signs of market strength.

However, on the negative side, Russell’s 2000 (IWM) had the Death cross (when the 50 DMA trades under the 200 DMA) confirming a bearish phase. This is a grim reminder that markets have serious downward momentum.

This leaves the Nasdaq (QQQ) as the last hold out in a distribution phase, and if you remember the cycle of phases, a healthy bull market in the future is more likely if we see QQQ shift into a bearish phase before it gets strong again.

How crude is Crude?

Crude inventories came out on Wednesday with a bearish outlook for crude with an increase of 4.7 million barrels, but showing promise for the refined products.

Crude oil (USO) initially reacted to the news with a big decline, but after a remarkable rebound, it closed up 1.8%. If you read Geoff’s blog post yesterday “How To Catch A Bottom In Crude Oil”, today’s low at the 10 DMA, and USO’s reversal today would not have come as any surprise to you.

However with President Obama securing the votes needed for the Iran nuclear deal to pass, we can expect to see more negative news and pressure on oil, since this deal will allow Iran to add its hat back into the oil distributing ring worldwide.

S&P 500 (SPY) Nice move back to the upside, but still can’t clear the 10 DMA at 195.62.

Russell 2000 (IWM) Inside day here. Also had the Death Cross so now trading in a bearish phase.

Dow (DIA) Strong move here as well but again found resistance at the 10 DMA at 164.44 intraday.

Nasdaq (QQQ) Glad to see this back over the 10 DMA. Now needs to hold 102.96.

Volatility Index (VIX) Down 11.54%. Rather disproportionate if you ask me.

XLF (Financials) Inside day here with 23.05 the place to clear.

KRE (Regional Banks) Also an inside day, with resistance at 40.26 the 10 DMA.

SMH (Semiconductors) Better! But until this clears 50.15 it’s all noise.

IYT (Transportation) Up 2.43% but not out of the woods until it clears 146.37

IBB (Biotechnology) Unconfirmed phase change back to warning.

XRT (Retail) Cleared back over the 10 DMA at 91.80. Now needs to clear 93.51

IYR (Real Estate) Inside day. With 68.31 strong support.

XHB (US HomeBuilders) and back to unconfirmed warning phase. Needs to clear 36.45 the 100 DMA.

GLD (Gold Trust) Retested the 50 DMA at 108.26.

SLV (Silver) Rallied and sold off yet managed to hold back over the 14.00 level.

GDX (Gold Miners) Looks like the 10 DMA was too much for this to handle.

USO (US Oil Fund) From up 24% to down 8% then back up 1.62%... getting dizzy yet?

OIH (Oil Services) Sandwiched between the 50 DMA at 31.68 and the 10 DMA at 29.05.

UNG (US NatGas Fund) Starting to look rather weak. Needs to hold 12.42.

TAN (Guggenheim Solar Energy) Consolidation with an inside day just over the 10 DMA.

TLT (iShares 20+ Year Treasuries) Sitting right on support at the 50 DMA at 120.83.

UUP (Dollar Bull) Back to an unconfirmed warning phase with 24.97 the 200 DMA support.

FXI (China Large Cap Fund) Inside day. Maybe the rescue fund is doing the job.

JO (Coffee) New all-time low!