Swing Traders: What is Next?

September 25, 2011

Mish's Daily

By Mish Schneider


I always have to preface any stray comments from technical analysis with the disclaimer that I am not an economist. But I wrote about Operation Twist a week before it hit the twitter stream because it seemed the right thing for the FED to do even though the market didn't think so. Encouraging spending and lending is a saner longer term solution to the ephemeral high of money injection. When you look at the board, many stocks are near all time highs while others have been demolished. A stronger dollar for real and not just a safety haven to an even worse off European currency, is also good longer term. Best to watch the sectors/groups that could have a positive (and delayed) response to a strong dollar, low long term and higher short term rates such as auto manufacturers, housing, consumer and capital goods (the statistics show the US consumer is getting him/herself out of debt faster than anticipated)

SPY Inside day, bullish engulfing pattern and positive pivots all make for a case that the break of the range will result in good follow through one way or another-either for a bounce or continuation much lower. 114.75 is the 200 weekly, the second time this year we have closed beneath. That lines up perfectly with Friday's high. Stranger things have happened than reversals when everything looks bleakest. But, one must also prepare for a breakdown with the support down at 87.00 the last swing low in 2009 before the run up.

DIA  Back in August, this never closed under the 200 weekly and such is still the case.

QQQ Like SPY, inside day, bullish engulfing pattern and positive pivots. Could run to 56.00 level next resistance or fail the lows and see 52.00 next level and still a long way off from the August low 49.93 and the 200 weekly at 45.00.

IWM Tested the August 9 low then rallied to close just shy of the 200 weekly moving average with yet another inside day. Move on breakdown measures to 50.00, so unless it breaks 65.75, still very vulnerable. Above there could see a bounce back up to 69.00 without violation of the trend.

ETFs:

GLD "What a dump!" to quote Bette Davis (you youngins may not know who she was) . Nearing oversold but not necessarily the next big play regardless as the tables turned or should I say twisted?

SMH It bounced, now must show more leadership and climb back over the 50 DMA to get exciting. Should hold 29.50 if good.

TLT Chart

TLT Bearish Engulfing Pattern at 2008 highs and overbought on the monthly chart.

XLF Must cross 11.80

IYR held the 200 weekly and now must cross it.

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