Market Analysis for Trading on 8/20/2014

Mish Schneider | August 19, 2014

Tonight’s evening watch was prepared by Geoff Bysshe, President, MarketGauge.

All four indexes, QQQ, DIA, SPY, and IWM have now gapped higher the last 5 days in a row! The QQQ telegraphed its strength in early August as it held the 50 DMA while the other markets sliced right through theirs. So a powerful move up should not be surprising, but we’re not talking about just moving higher, it’s been gapping higher too.

I’m not surprised that this is happening in August because light volumes seem to create markets that don’t respect gravity. However, it’s still impressive. Finally, it’s tempting to say “it can’t continue”, but it can.

The SPY is now in the zone of 198.45 to 199.05 that is the key resistance at the highs so that is the one to watch most closely for signs of gravity such as a close lower than the prior day’s low. IWM now straddles its 50 DMA to today’s range is important to watch there.

Tomorrow at 2:00 the market gets the FOMC minutes . Thursday we’ll see Jobless Claims, and finally on Friday Janet Yellen speaks about the labor market at the Jackson Hole conference. So there is no lack of catalysts this week that could derail or accelerate this move.

Subscribers: Positive pivots in all four indexes look for support at the FTP and S1 levels.

S&P 500 (SPY) - Sitting right below the zone of resistance that is the 2014 high (198.45 - 199.05).

Russell 2000 (IWM) - Stopped at the 115.70 level mentioned here yesterday. Now straddling the 50 DMA with a fair amount of support below it. It's an unconfirmed bull phase. Up is a more interesting trade here than down.

Dow (DIA) - Gapped right over the 50 DMA, now unconfirmed bull phase.

Nasdaq (QQQ) - Just keeps going up, but RSI measure is getting a little rich.

XLF (Financials) - Confirmed bull phase. Today's high is the low of the zone of resistance at the highs - 22.93-23.07

KRE (Regional Banks) Could not get solidly over 38.50. Looks like a bearish consolidation. A move lower could turn into a significant drop quickly.

SMH (Semiconductors) - A slow but respectable day.

IYT (Transportation) - Very narrow range day.

IBB (Biotechnology) - An outside day! Very few market sold off, let alone traded under yesterday's low. Sitting at its July highs with highs from February above. This is a good place to look for consolidation to begin.

XRT (Retail) - Gapped higher and out of consolidation.

IYR (Real Estate) - Holding its solid breakout over 2014 highs. If rates stay low this could well make a run for the 2013 highs at 76.

ITB (US Home Construction) - Impressive gap over both the 50 and 200 DMAs at 23.67 and 23.84 putting it in an unconfirmed accumulation phase.

GLD (Gold) - Stuck in a range between 128 and 122.

XME (Metals and Mining) -Weak follow through of its breakout of its 5 day range yesterday. The weekly breakout is impressive, but needs to hold 43.50 level to be good right now. One to watch.

USO (US Oil Fund) - Broke the key level of 35 and stayed down. Very weak, but would be interesting if it popped back over 35 tomorrow.

XOP (Oil and Gas Exploration) - Nice move up especially considering the real weakness in USO.

FCG (First Trust ISE Reserve NatGas) - Closed over the 10 DMA which will be interesting if it can do it again tomorrow because it has not closed 2x in a row over the 10 DMA since its highs in June. Plus, as I've been saying... 20 is a massive support area but need more confirmation to consider any trade.

TAN (Guggenheim Solar Energy) - Gapped right over 43 which is a big swing level. A retrace to that level could set up a low risk trade.

TBT (Ultrashort Lehman 20+ Year Treasuries) - TLT - Friday beginning to look like a blow off, but there's lots of support around 116.

UUP (Dollar Bull) - Gapped out of bullish consolidation and sitting at key resistance of 21.85.

EEM (Emerging Markets) - Took out 2014 high. The big picture here is the 45 level which is the top of a multi-year base.

IFN (India Fund Inc.) - Inside day right at a key level. Over 26 this has a nice trade with stop under 25.80. Keep an eye on it.

EWW (Mexico) - Broke out to 2014 highs but not decisively. Still looks like a big breakout.

FXI (China Large Cap Fund) - Very bullish consolidation.

CORN (Corn) Subscribers: - Sitting on the 10 DMA, and didn't continue yesterday's decline.

JO (Coffee) Subscribers: - Like CORN, dropped after trying to breakout over 36.65. key support level is 34.90.

Bye for Now!