Heading into the weekend, I have more time to look through our key stock market charts, gather my thoughts and take a step back to grasp the larger picture.
So, let’s get right to it!
Just like the movie Dazed and Confused, the US stock market indices are currently “phased and confused”.
The major stock indices have recently switched from bullish to caution. It’s important, because it tells us to take a careful and watchful stance, while trying to anticipate what may happen next.
It also gives us a clearer parameter of when to look at the stock market with our bull eyes or our bear eyes.
Let me explain the rules of the caution phase to make sure we are all on the same page.
The 50-day moving average (DMA) must be above the 200-DMA. The symbol price must be under the 50-DMA and above the 200-DMA.
All the charts above are in a caution phases. The Russell 2000 ETF (IWM), while in a caution phase, 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 Nasdaq 100 ETF (QQQ) 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 Dow Jones Industrials ETF (DIA) and the S&P 500 ETF (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 weeks 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 StockchartsTV presentation.
Important ETF trading levels to watch:
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
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.