SPY QQQ IWM Need Volume To Sustain this Rally

May 18, 2011

Mish's Daily

By Mish Schneider

SPY did exactly what we expected it to do after holding the 50 day moving average. Came in above key pivots then proceeded to rally the rest of the day with no pain. Plus, it even stopped perfectly at the adaptive moving average at 134.52. Ordinarily, I would be jumping up and down for joy for having predicted this move and sharing it with you last night. Except for one thing-no volume. Therefore, keeping with the analysis based on the required accumulation day in volume still absent from the equation, at this point I am taking this rally more as a mini swing opportunity rather than a prediction of a possible third and final bottom over the last three months and onward to new highs. Now that doesn't mean it won't happen. But, at this point, until we see an accumulation day in volume, I cannot be an aggressive buyer of anything.

QQQ has a little bit more room to its adaptive moving average. If it opens higher tomorrow and cannot get through there, I would be inclined to look at a couple of shorts I am recommending for tomorrow. Otherwise, same thing as SPY-needs volume.

IWM came back through the 50 day moving average, again predictable considering that I wrote about the slope on that 50 day moving average pointing up making the warning phase weak. Yet, no badly needed volume to make up for the string of distribution days we've had to this point.

ETF's: FXE after the bullish engulfing pattern yesterday, this did close higher but could not get up to the 50 day moving average at 142.55. Until it clears that number, we could see the dollar strengthen up a bit which certainly will put some pressure on the overall market.

FXI ChartFXI was the beautiful exception to the volume quandary. On strong volume, it gapped higher above the 200 day moving average and proceeded to rally closing on the highs of the day.

SMH also had a strong day getting back through the adaptive moving average. Still waiting for a new high close above 36.75.

USO bounced off of the 200 day moving average then retreated from the adaptive moving average at 40.05. That will be another one to watch to see if it holds up today's low, consolidates some and gets ready to continue its move up above the adaptive moving average or fails today's low and needs to do more work.

GLD** after the gap open, closed with a DOJI day which isn't surprising considering the noncommittal stance by the Federal Reserve today and the waffling dollar.

SLV Entered long today.

Of the ultra-shorts, FAZ is still in a recovery phase with the 50 day moving average at 40.99.

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