Evening Watch List for July 12th, 2011

Mish Schneider | July 11, 2011

SPY Working off of an Island top that was established last Thursday. The candle stick term is called aBearish Abandoned Baby. Typically, the trend reversal is confirmed by the black candlestick on the third day. There are other factors to consider such as the test and hold of the 50 day moving average at 131.85 with a declining slope yet a 10 day moving average which crossed above the 50 last week and has a strong upward slope. We also had a second distribution day in volume. SPY however, is the only one of the three indexes to have such a negative chart pattern.

QQQ did not have a distribution day in volume. It did not leave any gaps over the last couple of days. It also came very close to the swing high made in June at 59.34 with the high of 59.36 last Thursday before retreating on the close.The 50 day moving average, which is still considerably below today's price, has a slightly negative slope and the 10 day moving average which crossed above the 50 DMA a couple of days ago, has a strong upward slope. It is possible that we could see more of a correction down to 50 day moving average at 56.95. It is also possible that with a move above the floor trader pivot tomorrow at 58.16 we could see 58.55 where R1 is. The worst case is we are looking at the possibility of a double top, but we do not have confirmation through volume or price. The best case is we are having a correction.

IWM although this looks very similar to QQQ, it could not get close to its swing high at 86.82. Therefore, we are looking to the mid-caps once again as our next best indication as to whether this is a correction or the end of the rally. There are two very important fundamental aspects to the market right now-Earnings Season and the Debt Ceiling deadline.

Featured ETFS: 
GLD once again maintaining a strong move up as the safe haven. All-time high at 153.61. Beginning to look overbought on the daily but not the weekly. Now good underlying support at 150.50.

UUP got long last week at 21.37 through options. Closed today at 21.71, above the last two swing highs back in June. Has some resistance at 21.86, with the 200 day moving average overhead 22.16 which is now sloping upwards- first time since last October. FXE broke the 200 weekly moving average with its close under 140.10. Underlying support at 138.45.

XRT* still has an upward sloping day moving average which is considerably far away from the current price. If it can clear 54.88 the FTP, it's possible we'll see a move back up to 55.30 area, the lows from last Thursday and Friday.

IBB slope on the 50 day moving average at 106.42 has now turned slightly negative. After coming within two tics from all time high, it appears this sector and group has more correction in store before one can buy with confidence. Similar situation with IYR and IYT. 

Picks: I am using three criteria for all of the long picks. They have two days under the floor trader pivot, a positive slope on the 50 day moving average, and are above or near the 10 day moving average making them either Condition 1 or 2 Nuggets. In today's video, I go into detail about short-term trading patterns. Since we are in earnings season, we do not recommend holding any position into its report.

Longs: For the first time in three weeks, we are mainly in cash with only the long calls in UUP and a long position from last week in GLD.

CPO*the FTP tomorrow is at 56.34, 10 day moving average at 56.13. Can buy half a position above the FTP, add above 56.79 at R1 with an initial stop loss at 55.69 for a mini swing. Daytraders can use today's low 55.90. Has to clear 57.91 to stay in for a swing position. It does have potentialto move to 70. Earnings July 28. Day to swing.

POT*differs in its criteria for a long pick since it did not have two days under the FTP. But it did have an inside day, the 50 day moving average is still positive and the 10 day moving average comes in at 56.86.. The FTP is negative, therefore it must clear 57.93. The choice of risks-mini swing traders can use the 10 day moving average with a bit of a fudge down to 56.83, daytraders today's low 57.39 and swing traders beneath 55.57 the low from the consolidation over the highs on June 29, 30th and July 1. Has to clear Friday's hi 59.44, and then the next swing high made in April 61.80. After that resistance at 63.97. Day to swing.

NOV**reports July 26. Last week, made a high of 81.90. The multiyear high was made in April at 82.80. All-time high was made in 2008 at 92.70. Has to clear the FTP at 77.62 with a choice of risks. The 10 day moving average is at 77.62 in line with the FTP which makes that a very powerful area to penetrate. Daytraders can use today's low 76.33, mini swing traders under 76 and swing traders 74.00, the top of the consolidation area made back in early June. Day to swing.

PPO*earnings August 1. FTP is at 69.76 the area that must clear. The 10 day moving average is at 69.41. Daytraders can use the 10 day moving average, mini swing traders today's low 68.37 and swing traders the 50 day moving average at 64.82. Day to swing

NTAP*different looking chart since this is not stacked and sloped. But, the 10 day moving average has crossed above the 50 and 200 day moving averages, the slope on the 50 is slightly up and it tested and held the 200 day moving average today at 52.44. Must clear the FTP at 52.88. The risk is the 50 day moving average at 52.10 for swing and mini swing traders, daytraders can use the 200 day moving average. Has some work to do, but if the market recovers, looks like it is forming a flag which at this point will breakout if we clear 54.10. Does not report earnings until August 17. Overhead resistance at 56.50. Above that has a gap to fill to 58.15. Day to swing.

IBM** reports July 18. FTP comes in at 175.28. The 10 day moving average is underneath at 173.54, a good risk should it clear the FTP for swing traders. Mini swing traders can use today's low 174.61 and daytraders under 175. Last week's high was 177.77. Since that was also all-time high, it is difficult to say how far this might rally if the market is strong before next Monday when it reports. Day to swing.

BBBY**has a two day correction after making new all time high. The 10 day moving average is at 38.85, the only place that makes sense for a risk should it clear the FTP at 59.39. On the weekly chart has some resistance at 62.10. The projected move is to 65. Day to swing.

Shorts: Many of the shorts that I have recommended more recently are now oversold from the last two days.

MOS had you shorted the opening range breakdown, you got .5 of an ATR and would've taken home the balance. Now, it is trading beneath the 200 weekly moving average at 67.63. It's not exactly oversold, so if it can't get through the FTP at 67.40, and the market is weak, can short against the FTP and risk over the 200 weekly moving average. Has support at 65.68 based on the daily chart better support at 65. However, if the market remains weak recent low is at 58.84. Reports July 18.

ATI if this breaks the 200 day moving average at 59.85, next support is down at the 50 weekly moving average at 57.73. Reports July 26.

SOHU reports July 30. The 50 weekly moving average is at 73.12 under today's low. Has support at 72.10 the top of recent consolidation, but could easily drop back down to 64.77 the low made on June 24.