Technical Analysis: Accumulation in Volume

July 6, 2011

Mish's Daily

By Mish Schneider


This week's action is more of a sideways correction since the market is holding up remarkably well. SPY had a bullish engulfing pattern today on light volume. It has worked off some of its overbought condition, although not by very much.

QQQ ChartQQQ closed above 58.36, the high from May 31st. That has not worked off the overbought condition on a daily RSI; the weekly is still not registering overbought. Furthermore, it did have an Accumulation day in volume. With monster moves in NFLX AMZN AAPL for starters, NASDAQ, the only one of the 3 indexes that broke the 200 DMA, has come roaring back with a vengeance.

IWM still has the May 31st overhead resistance at 84.86. Similar to QQQ, had an Accumulation Day in volume and is overbought on the daily not the weekly.

Unless some unexpected event happens in the next couple of days, the market should remain strong especially with so many stocks on new highs.

Featured ETFS: 

SMH Although it closed down on the day, it held prior day low. Now, if it continues to hold above 34.25 and takes out today's high 34.54, it seems more likely now that it will find the momentum to get back above the 50 DMA at 34.81. Otherwise, still has strong underlying support at 33.50.

SLV The long position from 34.15 had good follow through. Today's low is now a support area to hold in order for SLV to gather enough momentum to get to and trade above the 50 DMA.

GLD gapped up over the 50 DMA. 150.18-.56 is the overhead gap to fill.  GLD is back in an unconfirmed bullish phase as we look for 2 consecutive closes above a key moving average to confirm a phase change. On the weekly chart, it is highly possible that we could see a move at least up to 154 and possibly beyond.

FXE coming into this week I wrote about a possible correction and strengthening of the dollar considering that the Euro could not get through 1.45. Now, today's low touched the 70 day exponential moving average in FXE. UUP held 21.19 the low from last Thursday. Now it is above the 50 DMA. A second close above that level will confirm into a recovery phase. Looking ahead, on a weekly basis, if UUP manages to get above 22, we could see a significant strengthening of the dollar.

XLF after an inside day yesterday, today it broke the previous day low early in the morning, then worked back up to close right at prior day low. Above 15.50, especially on a weekly close, will clear the 50 weekly moving average. But, in order for the financials to really get going, must get back above the 200 day moving average now at 15.69.

XLE if this holds around 76, good intraday support. The daily chart is still setup well with next resistance up at 77.66.

XRT and IYT both tackled all time highs on an intraday basis yet closed just below. With most ETF's, the closing price is more important than an intraday chart point. Therefore, would like to see both of these close on new highs on a weekly basis, otherwise we could begin to see a retreat.

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