Coming into the weekend, we have more time to look over our charts, gather our thoughts and take a step back to grasp the larger picture. So, let's get right to it!
From bullish to caution. This is the current phase the major indices have recently switched to. It's important as it lets us take a careful and watchful stance while we try to anticipate what may happen next. It also gives us a clearer parameter of when to look at the market with our bull eyes or our bear eyes.
Let me explain the rules of a caution phase to make sure we're all on the same page. The 50-day moving average (DMA) must be above the 200-DMA. In addition, the symbol price must be under the 50-DMA and above the 200-DMA.
All the charts above are in a caution phases. IWM is in an unconfirmed caution phase because, in this case, we would want to see 2 daily closes over the 200-DMA after it had traded below it.
If you take a look at the QQQs, you can see that ever since we broke below the 50-DMA, we are still sitting close by it but not trading above it.
On Friday, while both the DIA and the SPY closed green, they still have ways to go before they get back to the 50-DMA. So, while Friday was constructive, the markets still needs to do more to convince the bulls. And should we roll over this week, then we can assume that last week's bounce was nothing more than a dead cat.
You know why we never got bearish? It's because the transportation sector stayed bullish and has taken the lead. Want to see some great trade setups? Watch Mish's StockCharts TV presentation from earlier today.
- S&P 500 (SPY): 320 support, resistance at 331
- Russell 2000 (IWM): Support 142. 143 pivotal, 150 resistance
- Dow (DIA): 265 support, 275 resistance
- Nasdaq (QQQ): 260 key support. Resistance 273
- KRE (Regional Banks): Inside day. 33.50 support. Better through 35
- SMH (Semiconductors): 16.60 support, 170 resistance
- IYT (Transportation): 193 support. Needs to clear 202
- IBB (Biotechnology): Over 135 looks great
- XRT (Retail): Inside day has to clear 50
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
