Oversold Bounce or Resumption of the Uptrend?

The general consensus for the market near term is for a bounce to materialize (see today’s market), and how long it lasts is anyone’s guess at this point (according to the analyst differing views). In conjunction with the bounce there is a majority consensus as well that the selling will resume, again no one can predict when this will take place. Thus, what we can conclude from analyst is that the oversold conditions in the NASDAQ should result in a short term bounce followed by more selling. As with any belief about where the market is going, we have to let the market validate the belief moving forward. There is plenty to watch, and plenty to read on this topic, but for now be patient, let it unfold, and take the opportunities the market presents. Have a plan/strategy and trade your plan with discipline. Easier said than done sometimes.

Today was a good day to scan and look at what is happening across the markets and the following is quick view of the market through the eyes of ETFs. Why E(xchange) T(raded) F(unds)? They offer a real price view of what is happening in the various sectors and what we should be watching going forward. I have purposefully kept the comments brief to allow you to make up your mind relative to the current activity.

XLE – Energy held support above the $88.50 level. Crude oil moved to $102.25 helping the bounce.
XRT – Retail held the 200 DMA and bounced modestly on the day. Low volume move, but watching it nonetheless.
XLI – Industrials moved to the 50 DMA. $51.40 support is key for the sector short term.
SOXX – Semiconductors have been the leader. Tested $73.50 and held with an inside day on Tuesday. Uptrend intact and positive outlook for the sector remains.
IWM – Small caps broke $114 support and the 100 DMA. Bounced, but failed to regain the support level and upside momentum was on low volume.
IJH – Midcap sector broke below the 50 DMA and failed to recapture it on the bounce Tuesday. Following he small cap sector lower. Watch and manage any positions.
QQQ – NASDAQ 100 index tested $85 support and held with an inside trading day. Direction?
IYZ – Telecom held the uptrend off the February low and remains a volatile, but profitable sector.
IYT – Transportation sitting on the 50 DMA. Uptrend still in play and the 100 DMA needs to hold near term. Need transport to participate in the upside, at least the Dow theory believes that to be true.
XLK – Technology broke the 50 DMA on Monday, moved back to it on Tuesday. Need tech to remain in the leadership role it has established.
XLP – Consumer Staples still leading during this selling period. Near new highs currently.
XLU – Utilities holding uptrend as defensive stocks lead. Getting extended watch and trail your stops to protect your positions.
IYR – Real Estate (REITS) Defensive sector as well holding up. Resistance at the $68.50 mark and a break higher would be a positive for the sector.
IEV – Europe is in uptrend and holding near the recent highs. Watching for positive leadership short term. The global markets are seeing money rotate towards them in this current environment.
FXI – China broke above the 200 DMA and looks positive on the break higher. Trade setup. YINN leveraged ETF to trade the upside.
EEM – Emerging Markets confirmed the upside move with a gap higher. EDC leveraged ETF.
UCO – Crude oil broke from the triangle consolidation pattern on the upside Tuesday. Opportunity.
ECH – Chile broke from a consolidation top and uptrend continuation.

The upside move on Tuesday was a bounce from oversold conditions. How they play out going forward is a matter of time. We all can read what “THEY” say, but we have to define our own strategy of how to play this both long and short term. Our focus is to see if the downside takes root or the uptrend revives itself one more time. Patience remains the key until some clarity is gained.