Market Analysis for Trading on 5/2/13

Mish Schneider | May 1, 2013

Open Trade Update

Existing Position: SMH Long 35.02

Current Price: 37.03

Stop: 35.02 No loss

Target: 40.00 Next after taking 25% off of the position at 36.97

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Existing Position: XLF Long 18.38

Current Price: 18.51

Stop: 17.59

Target: 19.49

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Existing Position SGG Long 62.90

Current Price: 61.85

Stop: 60.99 (lowered for now)

First Target: 66.00

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Market Analysis for Trading on 5/2/13

I tend to despise hackneyed phrases like "Sell in May, then go away." I believe they become self-fulfilling prophecies and certainly, here we are May 1st, and that adage looks accurate. But, I have also seen about 5 other calls for the top this year that panned out for a few days, only to see the market reverse and go on to new highs. The FED left policy unchanged-they will continue to pump money through bonds. The economic numbers were disappointing-which is the main reason for the drop (and Bonds continue to reflect fear as do the small caps Russell 2000.) However, NASDAQ held 70.00 with the possibility it could be a topping candle (a Japanese technical analysis technique to document the daily high, low and close, different than the traditional bar chart.)  S&P 500 held the major key moving averages although again, with the same nasty looking candle. The Dow hadn't made a new high, but did manage to hang onto the moving averages. With all indicators, a second day confirmation is not only necessary, but prudent before calling out key reversals. And so we remain, prudently yours!

S&P 500 (SPY) Distribution day in volume but not enough to be that scary or that indicative of a one day correction only. Subscribers: Pivots negative in all indexes

Russell 2000 (IWM) Unconfirmed phase change to warning but more importantly, a ghastly drop from Tuesday's high with nearly triple the average volume. Only a return over 92.50 would reverse the aphorism for May.

Dow (DIA) 146.50 support area held. Important to note

NASDAQ 100 (QQQ) Held 70.00 which for now is a relief. Subscribers: marginal slingshot possibility.  

ETFs:  

GLD A gap lower and this looks pretty weak. A hold of today's low and move above today's high, and the recent bottoming formation remains

XLF (Financials) Held 18.50 key support.

IBB (Biotechnology) Long term this is a continuing growth area. Short term, it looks a bit tired

SMH (Semiconductors) Subscribers: Another possible slingshot high if follows through-but would only see it as an opportunity to buy again once the correction plays out

XRT (Retail) Broke 72.80 , a support level. Now needs to hold 72.00

IYT (Transportation) Mirroring the Russell 2000. Also, started this week mentioning the lower highs on every rally.  Subscribers: Standing out of its way for now

IYR (Real Estate) Perhaps a topping looking candle. Outperformed however and still a good area to gauge for how the market might or might not hold up

USO (US Oil Fund) Wrote that lower prices were in store and with the gap down, unconfirmed bearish phase

OIH (Oil Services) Interesting that this actually confirmed the bullish phase change Subscribers: Still making lower but also on my radar over R1 and today's high

XLE (Energy) Back to warning phase also unconfirmed Subscribers: Out on a chandelier exit

TBT (Ultrashort Lehman 20+ Year Treasuries) Back to the drawing board here with a new low  Subscribers: A move back over 58.97 would be interesting for a new reversal pattern

XOP (Oil and Gas Exploration) 55.60 the 200 DMA Subscribers: Aside now

XHB (Homebuilders) Short-term high in place-now coming into some support

SGG (Sugar ETF) Subscribers: Stayed long watching the futures to hold 17.00

FXI (China) Subscribers: No loss stop in place under the 200 DMA

RSX (Russia) Subscribers: Out with a breakeven stop on the balance we were holding

Bye for Now!