February 2, 2014
By Mish Schneider
The month ends with the market’s worst performance for a month since May 2012. However, the lows of last week were ultimately defended on Friday signaling that our bipolar patient-aka-the market, could have a mood swing either way come Monday. Hopefully, the market finds its way to some of the good drugs the pharmas have been pumping out lately.
But, investors must be prepared for the worst as we have 4 heavy duty days of distribution in volume-over the daily average volume and all in a span of the last two weeks of January.
To regain confidence, we must look for the major culprit in this decline-emerging markets. The ETF EEM is where eyes can be. A clearance of Friday highs will be a good confirmation that perhaps, at least for that sector, the worst is over temporarily. The operative word though-temporarily.
The emerging market chart pattern also indicates a breakdown over the course of the last 2 ½ years which means a move under 35.00-very ugly indeed.
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S&P 500 (SPY) Yes held the weekly lows, but not exactly jumping for joy on that news. A gap below on Monday-not good.
Russell 2000 (IWM) Let’s put it this way, a gap under 111.02, and we can see a really big dump. But, the yin and yang (Chinese New Year), we should also say that over Friday’s high and a very long term trendline will have been defended.
Dow (DIA) This might be the one index I wouldn’t look to short on a weaker open so close to the 200 DMA
Nasdaq (QQQ) I can hardly believe my eyes, but this confirmed the bullish phase closing out the week over the 50 DMA. No bubble in tech and social media here.
XLF (Financials) Broke down under the bear flag but, held the weekly lows
SMH (Semiconductors) I always want to love semis and still do, but if the market corrects, will wait for a move to 40.00 before reentering long
IYT (Transportation) confirmed bullish phase so another place that looks a lot better
IBB (Biotechnology) Was last week the peak? Could be based on the weekly close-something to watch for
XRT (Retail) If this moves over Friday’s high then maybe we have seen the bottom here. Maybe
IYR (Real Estate) Hard to read even with the outperformance on Friday.
XHB (Homebuilders) Reversal off the 200 DMA but now, has to clear the 50 DMA
GLD Looks good then looks worse but still over the 50 DMA
USO (US Oil Fund) Doji hammer candle-34.50 good place to hold
XLE (Energy) Very vulnerable
XOP (Oil and Gas Exploration) A group I loved, now looking much heavier
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs unconfirmed phase change to accumulation
UUP (Dollar Bull) Confirmed phase change back to recovery
FCG (First Trust ISE Reserve NatGas) Not a bad group to watch
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