For the third session in a row stocks had a down day. Just like yesterday stock opened weak and had an afternoon rally. Only today stocks materially weakened in late trading and couldn't finish near their highs. As a result, we are lowering the support/resistance levels for the DJIA (DIA), S&P 500 (SPY), and Nasdaq Composite (QQQQ) (see below). The S&P 500 tested and held its 50-day moving average on a closing basis again and the Nasdaq Composite has yet to test its 50-day moving average. Only the DJIA of the three major indexes is below its 50-day moving average. The Semiconductor Index (SOX) remains one of the strongest areas still above its 21-day moving average. Investor fear increased as the Volatility Index (VIX) rose 9.3% and closed above its 200-day moving average. As we stated in last night's update the market has been working off the recent investor complacency that has been building up. Also, as we noted last night we removed the US Dollar long ETF (UUP) and Euro short ETF (EUO) from our watch list at today's market open price. Overall, UUP and EUO returned 4.2% and 12.8%, respectively while they were on our watch list. In summary, the prudent approach (if you need to be invested in stocks) indicates it is ok to own small positions in stocks based on how the stock market direction consolidation is currently acting. As always, it is best to protect your profits and not to let losses become big.
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