A Potential Break in the 50-DMA and Where to Look Next

Mish’s Daily written by Forrest Crist-Ruiz. Assistant Dir of Trading Education and Research

Last Friday we noted how major symbols (QQQ, IWM, JNK, SMH) bounced off the 50-DMA. Now with the market still undecided, we can build a plan on what to look for if we break under the 50-DMA.

Let's take a look at the QQQs and the SPYs on a daily chart below.

Here we can see that while the QQQs have settled down almost perfectly on the 50, the SPY has a little more to go.

With a break of the 50 we then would look for a second day to close under the 50-DMA.

This is very important because the second day is confirming a caution phase change. Many times a moving average is broken, but the security closes higher the next day.

If both symbols break and confirm this makes a stronger case for the continuation down.

You might then think “Well great! Now we see prices confirming a breakdown, where might the price go next?”

Ahh, I’m glad you asked. If we have convincing closes under the 50 bringing us further away from the 50-DMA the next point of interest would be 260 for the QQQS and 323 for the SPY.

These prices are right at the 17-Week Exponential moving average for both symbols.

This leaves the QQQs in a prior consolidation area, and the SPY in a prior consolidation area with support from June’s highs.

We can never be 100% sure what the market will do but looking for past support areas and key indicators can help us prepare immensely!

S&P 500 (SPY) 329 support

Russell 2000 (IWM) Broke 50-DMA watching for a continue

Dow (DIA) 271 support

Nasdaq (QQQ) Sitting on 269 50-DMA. Watching for break lower.

KRE (Regional Banks) Also sitting on 50-DMA

SMH (Semiconductors) Next support 159

IYT (Transportation) Watching for a break back over the 10 DMA with resistance at 203

IBB (Biotechnology) Watching for support at 124

XRT (Retail) Next support at 50-DMA 48.00.

Volatility Index (VXX) Broke 50 and 200-DMA. Watching for continue

Junk Bonds (JNK) New Sitting on 50-DMA. Watching

LQD (iShs iBoxx High yield Bonds) 134.56 next support

GLD (Gold Trust) Held 180 support. A close over the 10-DMA would be nice.

GDX (Gold Miners) Holding onto the 50-DMA. Can it get back over?

SLV (Silver) 23.00 support and watching

USO (US Oil Fund) Large break-down with news of price cuts.

UNG (Natural Gas) Did not clear 14 and broke-down.

TLT (iShares 20+ Year Treasuries) Watching to stay above 10-DMA

USD (Dollar) 10-DMA resistance Closed under 50-DMA watching for confirm.

VNM (Vietnam) Held the 10-DMA

JO (Coffee) Still looks good

CANE (Sugar) Ended the day green. Watching to clear MAs

Soybeans (SOYB) Closed higher

DBA (Agriculture) Needs to continue higher passing the Mas.