Market Conundrum $SPY $QQQ $IWM

March 4, 2012

Mish's Daily

By Mish Schneider


Dow Jones Industrial Average (DIA) and NASDAQ 100 (QQQ) closed slightly higher on Friday while QQQ closed higher on the week and DIA basically unchanged. S&P 500 (SPY) closed lower on Friday but slightly higher on the week. Russells 2000 (IWM) sure was ugly all around, both for the day and the week. The consistent divergence in the market is fascinating and a bit daunting for traders. I began 2012 with the analysis that this year would yield lower commodity prices, higher interest rates, and U.S. Dollar, which in turn would lead to strength in the real estate, transportation, and financial sectors. The market had the u-turn for a short time in gold and oil, but can I safely put my money on my initial predictions now? Timing entries to control risk is everything. With so much indecision in the macro picture, ready to pounce, but patient in doing so. Oxymoron? Taking my cues from the market.

S&P 500 (SPY) After the bearish candle last Wednesday, had 2 inside days in a row and held the fast moving average. If follows in IWMs footsteps could get nasty, but another distinct possibility is more of this sideways action. Another is a breakout of the recent range.

NASDAQ (QQQ) Held the fast and has some clearance from it. 64.00 now a level to hold.

Russells 2000 (IWM) Broke 81.00 and like the nursery rhyme, came tumbling down. No big volume on the decline. 78.80 is the 50 DMA to watch for now. Not bearish by the way, just gave the weaker longs reasons to be nervous.

ETFs:

XLF (Financials) Closed just above the 200 weekly moving average with 2 inside days in a row. Seems like a good sign that it would pause so close to the major trend reversal. Still counting on this sector to show us the way.

XRT (Retail) Still holding the fast moving average.

IBB (Biotechnology) Biotech was the first one to show strength. If this can continue to go sideways and not fall apart, will look to this group to lead again.

SMH (Semiconductors) Would like to see this hold 34.00 and head to oversold on the RSIs. Otherwise, could see 33.00 quickly.

IYT (Transportation) Sideways, sort of middle of the recent range-unclear.

IYR (Real Estate) 59.80 support level and looks good if takes out Friday's high.

Note: USO MOO XLE GLD are all still in bull phases. They could be rolling over, but no real confirmation in place as of yet.

TBT (Ultrashort 20+ Year Treasuries) Still like this but have no real confirmation of anything right now except a recovery phase with the same trading range been writing about for the last several weeks. Show yourself!!! The only one getting rich on this right now is the brokerage firm that books my commissions.

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