Stock Market: Earnings versus Politics

July 14, 2011

Mish's Daily

By Mish Schneider

SPY After opening higher and failing to get through the first 30 minutes opening range or R1, it reversed and closed below the declining 50 DMA with a Distribution Day in volume. 130 was the breakout area from 2 weeks ago and it got fairly close with a low today of 130.68. But, since the island top, the anticipation that SPY would be weakest of the 3 indexes certainly played out. If it can cross back above the 50 DMA at 131.56, perhaps it can begin to recover. A close above 132.20 would be a healthy sign.  On the weekly chart, the bullish trend remains intact.

QQQ Once it broke the opening range low, it never traded back above and did what was expected-dropped to the 50 day moving average which is now declining and comes in tomorrow at 56.77. It also had a Distribution Day in volume with the weekly trend intact. Should it open above 57.40, the floor trader pivot, expect to see a test to the 10 day moving average at 58.01. A close above that would be encouraging. Otherwise, a break of the 50 DMA and 56.50 next stop.

IWM Mirrored the QQQ by stopping just shy of the 50 DMA at 81.88. Now, would not expect the midcaps to lead.

With the positive earnings in GOOG, and the immediate follow through

in BIDU AMZN SINA and AAPL, it will be Nasdaq that will lead the way from here. The question is- what will have the biggest impact-the earnings or the political posturing? Until there is more clarity, we are sticking to either swing trading with wide stops and small position sizing or active daytrading.

Featured ETFS:

GLD new highs again. Since it got so close to our target of 155, a conservative stop is now is under 153.55.

IYR Was the go to short on the opening range breakdown today. Now, holding the 70 Exponential moving average at 60.26. With underlying support at 60 and oversold conditions, expect a bounce 61.25 area for now.

XRT A move back above 54.35 should then test 55. The 50 DMA is still positively sloped.

SMH The 50 weekly moving average comes in at 32.24 with a recent swing low in June at 32.15. That is the last area of support that would give this some promise of a turnaround. Otherwise, a test of the 30 area very likely.

OIH ChartOIH Held the declining 50 DMA coming in now at 148.53. Also failed the overhead 10 DMA at 152.29. Back above 150.30 and would expect another test of the 10 DMA. Otherwise, underlying support at 147.70 area.

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