Evening Watch List for June 16th, 2011

Mish Schneider | June 15, 2011

The last time we saw an orange paint bar denoting a distribution phase or one in which the price trades beneath a stacked 50 and 200 day moving average, was right before Labor Day weekend 2010. And if we go back to exactly a year ago, a couple of similarities in the QQQ chart. Up until May 2010, we had been in a bullish phase; then entered a warning phase; then the warning phase started to accelerate as we headed into July; we entered the distribution phase; even saw a death cross towards the end of July which never got much follow through until finally, the price went back through the 200 day moving average and back to a Golden cross in late September, which brings us to today.

One possible scenario is that we test the recent low of March 16 at 53.77 in QQQ and then get back above the 200 day moving average now at 54.58. Possible. Another is that we drop to test the 50 weekly moving average now at 53.14. Regardless, although we are extremely oversold once again on a weekly chart but not on a daily, it does seem inevitable that we need to go to lower levels before any possibility of consolidation or a volume spike low is put into place.

In my video analysis today, I featured IWM because not only did it not take out Friday's low today, but does remain above the 200 day moving average. On the weekly chart there is support right below the 200 day moving average at 76.95 should it break Friday's low and the 200.  Back in September 2008 the peak high made before the huge selloff was at 77.82. Today we closed above that. Considering how badly beaten up a lot of the bigger stocks are, it would not surprise me one bit to see the mid-caps hold up better and possibly give us the first indications of whether or not we are approaching major support levels.

SPY will most likely test and break the 200 day moving average now at 125.86. But, similar to QQQ, the March low which may wind up being an important level of support is slightly lower at 125.28. Another reason why that March low is significant, is because that same week is when the 50 weekly moving average crossed above the 200. And, the weekly chart in SPY is oversold.

To clarify, the oversold condition is shorter-term, the key support levels and moving averages represent a longer-term picture. The best prediction is for lower prices possibly met with historical support, followed by another bounce. But, until we see strong volume patterns on the upside with neutralizing slopes on the daily moving averages, especially the fast and the 50, these bounces look more like sell opportunities.

ETF's: IBB took a long time to give it up today, but it finally did closing right near Friday's low near 102.75. Interesting is the slope on the 50 day moving average which actually rose instead of declined with the downward move. At the sake of sounding like a broken record, I would still go to biotechnology first should the market firm.

XRT also holding up better than most although the slope on the 50 day moving average is declining slightly. Today's price action was a gap fill from Monday. Therefore, this would be another go to" choice for buying should the market firm.

IYR certainly did not surprise with its decline. Now, we have underlying support at 57.96 and then again at 57.14. Plus the March low is 56.95.

As anticipated with the strengthening of the US dollar today, the energy and oil sector got hit hardest. XLE is hanging onto the 160 day exponential moving average and OIH has broken the exponential and now looking like it will test the 200 day moving average at 140.04. I would not be shorting either of these at this point since looking at the weekly chart OIH has tremendous support around 133 and XLE has a bit more room to the downside, but starts coming into major support around 65.

Another key to the market is XLF. What is so interesting is that during the entire bullish run in the fall of 2010, this ETF never even got close to the 200 weekly moving average. Furthermore, the slope of that moving average has been declining since 2008. The conclusion from that is that the health of the financial system has a long way to go before recovery. On the daily chart, we held Friday's low at 14.62 today. Now, if we do not fail that level and start to turn around, the next time we trade above 15.00, that would be another reliable indication that we could see a bounce in all areas.

SLV held up remarkably well today. It's possible that it's finding a base down around the 32 level. And it is equally possible that with the declining slope in the 50 day moving average which is overhead, it is consolidating before breaking beneath 32 and heading for another leg down. Aside in this for now.

Coming in today, the safe money was not on the long side as mentioned in last night's watch, but rather on the short side. Now, the safe money for tomorrow appears to be either in cash, if not already short and the market drops further, or watching for buy opportunities against the key support areas mentioned.

Picks:

CELG** held Friday's low at 57.62 with today's low 57.76. Has good underlying support at both the 160 day exponential and 200 simple day moving average at 57.17. Also had an interesting hammer candle. Yesterday, it closed lower even with the market extremely firm which now gives us two days under the floor trader pivot which will be stacked slightly positive tomorrow. Over 58.28 can use today's low as the first level of support and risk and buy in anticipation that this could move back up to overhead resistance at 61 with better resistance at the 52-week high made last year at 65.79. Day to swing

BIIB some of you may have bought this yesterday on the opening range breakout in which case if you were doing it for mini swing you're still in. Today, it held S1, closed above the 10 day moving average and had an opening range reversal towards the end of the day. Now I want to see it hold 92.82, take out 94.07, in which case we can assume that it will resume the rally, with near-term resistance at 100 and all time high made in April at 106.99. Day to swing.

CRM*today this held the 50 simple and the 70 exponential moving averages. Plus the slope on the 50 is up. Now, the 10 day moving average is overhead at 141.77. If we get any firming action in the market, this could set up as a buy opportunity and possibly even have a quick rally up to overhead resistance now around 151. Day to mini

YUM*after the gap up yesterday, today it held the 50 day moving average which is sloping upwards, and had a bullish engulfing pattern. Provided this holds 53.94, which will keep it above the 10 day moving average, although we have overhead resistance all the way up to 56, this is poised and shows potential for possibly getting there. But again, would use a tight risk under the floor trader pivot which will be stacked positive. Day to mini

AMGN another one that has an upward sloping 50 day moving average and held the low made Monday at 57.87 with today's low 57.86. The 10 day moving average comes in at 58.60, so a move above would give a full ATR of risk, but nonetheless also an indication that this could continue its move up. Recent high was made at 61.53, better resistance up at 65. If it comes in lower, 57.68 is the 50 day moving average and S1 is 57.62. That would also be a good place for a low risk buy opportunity. Day to mini

ORLY*if the market weren't down so big today I would've gotten long. Now, this actually had an inside day today and held the 10 day moving average now at 59.46 which matches yesterday's low. That is your clearly defined risk should this come in lower. One concern is that tomorrow's pivot points will be negative which means it also must get above R1 at 60.24 just above today's high. If it comes in higher, can use that with an opening range breakout and a tighter risk down to the floor trader pivot which comes in tomorrow at 59.87. Day to mini

LULU while this is still trading beneath the 50 day moving average at 93.70, the slope is up and this outperformed the market today. There is an overhead trendline coming down from the all-time high made in April which comes in tomorrow around 95.60. I would either like to buy this near 90 with a risk to under S1 89.88 or above the floor trader pivot which is stacked positive tomorrow at 91.73 and use today's low 90.30 as risk. Since the moving averages are not stacked, I would be reluctant to buy this on strength. But, if we do get through that 93.70 and the market is firm this does have some good potential back up to the all-time high made in April at 102.83. Day to mini

AAPL** today this tested and held the 200 day moving average at 325.14. All things considered, this is still holding up relatively well compared to some of the bigger stocks. Now, since the pivots will be negative tomorrow, it must hold not only the 200 day moving average but S1 at 324.35. Most likely, I would not buy unless this clears first the floor trader pivot at 327.32, then the 160 day exponential moving average at 327.86. But ideally it must clear above today's high at 330.30. The initial overhead resistance at the 10 day moving average is at 333.50 then better still at the 50 day moving average around 337. But, if you can get in with a tight risk down to the 200, and the market has any possibility of firming, you could see a decent size rally in Apple since it has been somewhat dormant over the last few months. Day to swing

Shorts: mini swing traders established shorts today in CNX which now should stay below 47.95 to keep you in, IBM which should stay below 163.30, MOS which should stay below 67.20.

WHR this is sitting right on the 200 weekly moving average at 72.90. Last week's low was 72.48. If this can not get above 74 and begins to roll beneath 72.90 and then today's low, could have more room on the downside. Nearest support is back from 2010 at 71 but under that level, the next support is down around 52. Day to swing.

Goodnight!