Triple Play Indicators Applied To Key Sectors

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This video is part of the Mish’s Daily commentary you’ll find at www.marketgauge.com

If I were to continue with Mish’s party analogy from her last Daily, I’d have to say the market’s that got rattled by Friday’s party were a little sluggish today. None the less they were in a good mode and edged higher.

Additionally, Mish left you with a ‘tidbit’ to keep an eye on which was JNK. It moved up nicely to new highs for the year today.

The last week of August is typically one of the lightest volume weeks of the year, so it can often be a week of choppy intra-day action. However, some areas can attract attention and with light volume, trend nicely. Facebook, (FB), may just be in this kind of mood.

And the tip-off that today may be a nice trend day was in knowing what you’ll learn in today’s “big picture chart point” below.

In this type of environment it’s best to keep your eye on the big picture more so than potential short-term inflection points.

Since I’ll be covering for Mish all week I’m going to try to have a “big picture chart point” theme of the day, and review the Modern Family along with a few other ETFs with a video that shows how our MarketGauge indicators see the state of the market.

Today’s big picture chart point is the 10 DMA. While this is always a potentially important price level, right now it’s getting increasingly important in the QQQ.

A simple rule of thumb for timing market turning points that could last a few weeks or more is to wait for the market to cross the 10 DMA, and then if it can’t recover its cross within a few days, the trend is often changing.

If we look at the QQQ with this is a big picture analysis we’ll find…
The QQQ had not closed under its 10 DMA in about 38 days prior to last Wednesday. Today marked the 4th consecutive day closing under it. Has the tide turned on the QQQ?

A simple way to use this to keep you out of trouble is to avoid getting bullish until the market closes back over the 10 DMA.

Additionally, markets that pause under the 10 DMA for a few days but don’t sell off significantly can also see quick moves higher after they close over the 10 DMA.

FB was a good example of this today, because while the QQQ closed under its 10 DMA on Friday, FB closed well over it. So its continued strength in the morning today made it a good breakout to follow.

As for the general market…

If we look at the same analysis on the SPY, DIA and IWM we’ll find that the SPY closed very slightly over its 10 DMA after 3 days under, and the DIA is a good example of why waiting for a recovery makes sense.

The IWM, however, has not had a close under its 10 DMA since the beginning of August. The chart may not look all that strong, but it’s unlikely that we’ll see general market correction until it gets weak by this measure.

With the SPY so close (QQQ too), and the IWM being ‘strong’ by this measure, it’s reasonable to remain bullish, as long as the IWM doesn’t join the QQQ under the 10 DMA.

Furthermore if the QQQ can recover its 10 DMA the big picture will look much brighter – maybe even as bright as FB.

Watch the video for a view of the Modern Family and more using our Triple Play indicators.

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