Market Analysis for Trading on 7/28/2014

Mish Schneider | July 26, 2014

Let’s start with the obvious observation from last week. The Russell 2000s could not confirm back to bullish and wound up closing out the week in a warning phase, marginally holding onto the 200 DMA. As the market internals remain bullish in the S&P 500 regardless of Friday’s action, one can look for 2 possible scenarios to begin this week.

One-the small caps gap higher off the 200 DMA and we all go back to spying the 50 DMA. Two, it either opens near the closing price on Friday and works lower or worse, gaps lower beneath the 200 DMA and then keeps going south. It opens lower and works its way higher closing green. Okay-that’s really 5 scenarios.

The biggest loser (maybe not the biggest percentage wise, but from a new highs then collapse story) Semiconductors. Although they are holding the runaway gap low thus far from 6/13 and thank goodness we are not looking at a massive island top, damage is done definitely. Irreparable? Doubtful depending on how far out one looks.

Third tell, interest rates-after two days of firming action (incidentally, TLTs and other instruments in bullish conditions often see 1-3 days of correction before they turn back around) closed on new 2014 highs.

Examining my 3 focus sectors: Regional Banks (KRE)-remain under the 200 DMA but held up regardless, leaving us watching that moving average closely. China (FXI)-outstanding week by anyone’s standards, closing out on new 2014 highs. Solar Energy (TAN)-the ETF struggled but companies like Solar City and First Solar did well. Jury still out there.

One thing I will look for-when the equities get cheaper, the tough go shopping-always a relief to see the high momentum stocks trade closer to clear risk points. Even with the misses, thisearnings season has produced 80% revenue beats on those that already reported!

S&P 500 (SPY) Held the fast moving average. Subscribers: Negative Pivots in all

Russell 2000 (IWM) Marginally held the 200 DMA

Dow (DIA) 168.20 the 50 DMA to watch

Nasdaq (QQQ) Held the fast moving average with 96.30 pivotal

XLF (Financials) Held the fast moving average-not out of the running yet

KRE (Regional Banks) Inside day under the 200 DMA-worth watching

SMH (Semiconductors) Oversold and near the 50 DMA

IYT (Transportation) Could be a reversal pattern but does have support on the way down

IBB (Biotechnology) Held up fairly well with 260 major resistance

XRT (Retail) Yup, one day wonder last Thursday

IYR (Real Estate) 73.00 pivotal-as in might need a rest under that level

ITB (US Home Construction) Messy

GLD Moment of truth on the moving averages pointed up! Island top remains intact though

Metals and Mining (XME) Over 42.33 looks better Subscribers: with risk to 41.80 or so

USO (US Oil Fund) Rough start on Friday, better finish-like better over 38.00

TAN (Guggenheim Solar Energy) Subscribers: Looking at longer term and trying to ignore the noise-still see major upside just a matter of when

TBT (Ultrashort Lehman 20+ Year Treasuries) New lows for the year

UUP (Dollar Bull) First time in almost a year this has stayed above the 200 DMA

JO (Coffee) Subscribers: confirmed phase change to bullish

Bye for Now!