I left the 50, 100 and 200 day moving averages in this chart to show how fast MDY has come off its lows.  Just one month ago MDY was trading below its 50 and 100 day moving averages, but now it’s more than 4% above its 50 day moving average and 7% above its 100 day moving average.  MDY hasn’t touched its 200 day moving average in a long time and would have to fall almost 13% to cross it again in the near term.  The 200 day moving average is moving higher every day, but it’s easy to expect a reversion to the mean and see MDY fall 5-10% to get closer to it.

For an odds play, MDY has finished higher each of the past seven days.  I don’t expect that trend to continue.  I’m not shorting MDY here, but have thought about buying some puts or at least a vertical put spread to gain on the impending dip I’m predicting.

Adding to that theory is that CSCO is at the top of its trading channel and should at least bump sideways before reaching new highs.  While CSCO has edged higher the past couple of days, the volume has been nothing to write home about.  CSCO could take a $0.50 dip from its current level and not fall below its 10 day moving average.  That would line up with the trend line of higher lows and could be a great entry point if you’re not already invested in it.

In addition to the trend lines, JPM is moving above its moving averages each week.  I think the 200 day moving average could act as a floor to the downside in the near term giving the potential for more gains a little more credibility.  The 50 day moving average has held support the past couple of days which adds to the bullish picture.  The bears might point to the 100 day moving average which is still a solid hurdle for JPM to deal with.  Within the next few days we’ll see if the short trading channel continues to work for JPM or if the 100 day moving average offers more resistance than the trend lines can handle.

The way the chart is moving it looks like the trading channel holding recently gives EEM a range from $38 (ish) to 40.  Along with this trading channel, the three potential technical indicators that are going to be most interesting to watch are the 20 and 200 day moving averages and the trend line of lower highs from the beginning of the year.  EEM hit resistance at the 20 day moving average today and stopped its intraday rally from its lows.  If EEM can get above its 20 day moving average, which might be a tall order after dipping below it the past couple of days, it will have to fight to get above this trend line of lower highs.

On the other hand the 200 day moving average offered support today around the same area as the bottom of this trading channel I’ve identified.  I hold the 200 day moving average in high regard when I see support hold.  Once the 200 day moving average is in play the downside risk typically starts diminishing.  All of that together makes EEM a good chart to watch as one of these indicators is going to break soon and should show us the likely direction for the following few weeks or 10%, whichever comes first.  I’m expecting the move to be higher and probably won’t exit my position even on a dip below the $38 range.

The 10 day moving average for SPY is at 107.89, so nearly dead on where it closed for the day, but slightly to the bulls favor.  Again, tomorrow will be interesting to watch this one too. 

Efharisto Hellas (Thanks Greece).

The biggest bullish indicator that seems to hold true on a regular basis for NDAQ is the Williams %R indicator for 14 and 28 day periods.  I’ve highlighted NDAQ in this space a couple of times in the past when this happens and today is another buying opportunity.  I’m already sitting on NDAQ February 20 naked puts and yesterday I bought some more shares outright in my IRA.  I think there’s plenty of upside left for NDAQ and see at least another $1.00 in it in the near term.  NDAQ is fairly volatile, but tends to trade in a range.  $18 is the bottom of that range and the top side has been shrinking, so I’m not sure how high it’ll go before taking a breather again.  Having GS pushing it could help get it out of its rut though.  I’ll be in for the ride for at least another 5% to the upside.

The trick now is deciding if that same moving average will hold or if the break from the trend line is foreshadowing of an even deeper correction.  The best case scenario for QLD based on this chart shows a slow rise with the previous line of support remaining, but as resistance.  I circled the past three times over the past year when QLD broke above oversold in the Williams %R indicator for the 14 and 28 day indicators.  Each time the indicator moved out of the oversold range QLD produced a new leg up in the long rally.  The key isn’t that it’s oversold now.  That can stay the case for days or weeks.  Watch when it moves higher to make it a true buying indicator.  To be sure it’s not a head fake, maybe it’d be even smarter to wait to wait for QLD to move above the trend line I referenced above.

One of the biggest indicators to watch to see which way GS goes is the 200 day moving average.  GS fell below this line on Friday, after holding support there on Thursday.  One could look at this line two different ways.  GS has had a reversion to the mean so the downside might be limited from here or since GS couldn’t hold support here there could be more downside as GS overshoots the correction.  I drew two horizontal lines also.  The first one looked like it’d hold, but also broke on Friday.  The lower one is where GS found and held support Friday.  If this line breaks we could see GS trade down to the $140 range before finding a new area of support.

If GS can pull itself back up from these lows it will still be in its descending trading channel until it breaks above the $175 range.  To get there GS will have to climb above its 200 day moving average and then its 50 and 100 day moving averages.  Each will offer another chance for a bounce higher to fail.  I’m waiting a little longer before I get turn bullish on GS.  I don’t mind missing the first $5 up to have a stronger conviction it’s not a dead cat bounce.  I want to see how the 200 day moving average works for or against GS too and I’d like to see a move out of oversold on the Williams %R indicator as a final confirmation.

If support from those trend lines breaks, FDML could fall as deep as $16 before it finds the next area of support, then down to $14.  If FDML makes it as low as the bottom trend line below $12 I would think this would be the time I’d have to consider moving a large portion of my portfolio to it.  Based on the chart I think the next likely move for FDML is higher from here.