October 10, 2013
By Mish Schneider
No jokes, no allegories, no metaphors. A market that climbs 300 plus in one single day is a tough act to follow! Statistically, Thursday’s session was the second time only since the first day of 2013 that the S&P 500 closed up over 2%! This is the type of rip your face off rally that comes when the crowd gets too short too fast. That double the average daily volume I noted from Tuesday and Wednesday in the S&P 500, was clearly a sign that the selloff was a blow off and most of the weaker longs had been shaken out (rightfully so.) But, it also indicated that getting short the market was not the best idea either. As we end this week with still no resolution to the government shutdown or a vote on the debt ceiling, it’s time to separate the technical signals from the news. If Thursday’s gap low holds, especially in the S&P 500 and it closes for a second day above the 50 DMA (as it is now back to an unconfirmed bullish phase), then the signs point to more upside for the upcoming week. In the sectors and groups, the Financial group as some big earnings coming up and would be well worth a follow if continue to firm. Conversely, if the market cannot hold and begins to rollover, I would look at Biotechnology as a place to see more fatigue after its huge run up and very hard fall from the highs.
Russell 2000 (IWM) A gap above Thursdays high is compelling but noted that it ran to resistance.
Dow (DIA) Confirmed reversal off the 200 DMA but running into resistance at the 50 DMA
Nasdaq (QQQ) Cleared the 50 DMA and has to confirm it can stay above it
XLF (Financials) Unconfirmed bullish phase. Subscribers: Like this if holds over the 50 DMA
SMH (Semiconductors) Still a fave longer term
XRT (Retail) Also has to confirm the bullish phase
IYT (Transportation) Another one attractive to follow if confirms over the 50 DMA
IBB (Biotechnology) If cannot clear the 50 DMA, then consider a short
GLD At the bottom of the range making these levels critical to hold or can see much lower prices in weeks to come
OIH (Oil Services)Another nice looking sector if everything holds
TBT (Ultrashort Lehman 20+ Year Treasuries) Interesting that TLTs tested and held the 50 DMA. Perhaps lower rates are in store for now
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