June 12, 2011
Mish's Daily
By Mish Schneider
In an attempt not to state the obvious, lots of damage done on Friday with SPY down 1.42% and another alarming Distribution day in volume. We anticipated lower prices due to the accelerated warning phase; however, the rapid decline on Friday came as a bit of surprise and perhaps is the "flush" many investors anticipated. I wouldn't get too excited about any prospect of the end of the decline over the intermediate term as the indicators are still negative. However, if one just examines the current phase, the longer term up trend is still intact as long as the SPY holds the 200 day moving average and that that average's slope remains positive. In the near term, not oversold on the 2 day RSI, but approaching oversold on the McClellan Oscillator. The up/down volume also at the lower end. We are getting to or close to oversold levels.
QQQ which had had the inside day last Thursday along with a DOJI candle pattern, made the daily trend on Friday obvious when it broke the lows from that prior day. Now, it is closer to the 200 DMA than SPY, which is still sloping upwards. So, once again, QQQ might give us the more obvious clues as we enter this week. 54.41 is the 200 DMA. But, let's not get too bogged down on that exact number to hold. On the weekly chart, 53.77 is the March 18th low to look at and both the 50 and 200 weekly moving averages still stacked and sloped. And speaking of March, that low was put into place with a spike in volume followed by two inside days followed by another attempt at a sell off, then a gap higher with accumulation in volume. One difference was the slope of the overhead 50 DMA. And that time it was still positive and now negative. But, the bigger point is that anything can still happen since the patient is ill but not necessarily dying.
DIA, which has been the strongest, is not the greatest indicator, but I will note that it is holding the 160 day exponential moving average at 119.15. The 200 DMA is still quite a distance away.
Last week's game plan was to keep both short and long positions for daytrade to miniswing timeframes. The dollar strengthened which further created havoc in the market. Plus, the Chinese stocks put salt in the wound after an appropriate reaction to bad economic indicators in the US. This week, a similar game plan seems sound. Find out and underperformers and catch the momentum. Focus on retail, possibly semiconductors and biotechnology for strength and commodities (oil, metals-especially SLV) and real estate for weakness.
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