Stock Market: Fake it Til You Make it

October 23, 2011

Mish's Daily

By Mish Schneider


Friday could be the classic close that cleared the recent congestion in SPY with a fourth accumulation day in volume under its belt over the last 2 weeks. Cleared the 80 monthly and 160 Exponential moving averages. That makes 121.30 key support, 126.80 the next hurdle at the 50 DMA and then 127.60, the 200 DMA or the mother of a phase change from recovery to accumulation.

QQQ has had good volume patterns but Friday, the pattern was rather insignificant. The high of the recent range to clear is 58.29. Support area 56.30-80.  Naturally, the leading stocks have to stay in the game.

IWM was weaker than the others still under the 70 EMA yet hovering. A close over 71.34 would look good, in addition to some volume on the ride. Now, 69.80 support.

It is essential to look at the market top down and consider the individual sector/groups as we face either an “all for one” continuation, or more divergence making traders less confident. The market internals remain overbought, but the price/volume/slope/phase positive. After a 15-20% move off the lows, market digestion has been quick. Nasdaq and technology made the move first and now have paused. Energy and other commodities rallied into resistance. Financials and Regional banks similar. Midcaps are at the “make it or break it” point. 

ETFs:

XLK* (Technology) After confirming the phase change from Accumulation to Recovery, Friday it closed with a doji day right on the pivotal 25.50 level. Key area to watch for next direction with divergence in its top holdings (AAPL near oversold, ORCL near overbought.)

IBB (Biotechnology) Through 97.90 clears the 50 weekly MA. Range bound as this group approaches overbought. Under 94.50 trouble.

IYT (Transportation) Rallied right up to the August 31st high.

XLF (Financials) Cleared 13.05 the 70 EMA. More hurdles to come like 13.50 high of last 2 months. 12.45 key support

OIH* (Oil Service Holders) After taking out the weekly high on Friday, closed beneath, somewhat disappointing since it could not clear the 50 DMA. An area to watch should market sell off for possible short.

XLE (Energy) The 160 EMA next resistance 68.75.

XRT (Retail) Sure looked like a bottom and very much a leader on this move.  Still could see big move to 58.00 but now approaching overbought.

TBT (Ultrashort Treasury Bonds) Approaching overbought before it has a chance to clear the 50 DMA overhead.

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