***Executive Summary***

• Stock Market Stance Remains Neutral
• SPY Firms at Trendline Support
• QQQQ Shows Less Weakness
• UUP Stalls at Resistance Zone
• GLD Forms Shooting Star at Resistance
• USO Forms a Doji at Support
• TLT Bounces off Key Retracement
• Stock/ETF Setups at 7:30AM (video link)

***Stock Market Stance*** No change. Neutral on 29-January. As noted last Thursday morning, Wednesday's surge was not impressive enough to warrant a bullish stance on stocks. Nasdaq, NYSE, SPY, QQQQ and DIA volume levels were uninspiring. AD Net% and AD Net% did not reach positive breadth extremes to cancel out prior negative breadth extremes. Wednesday's rally was concentrated in the financial sector and not spread evenly throughout the market. Bullish resolve quickly faded as stocks moved sharply lower on Thursday and Friday. While the medium-term trends are still considered up, I do not have a lot of confidence in the bulls right now. Moreover, trading has been flat since mid October (four months) and this is a swing traders market, hence the neutral stance overall. The current swing is down and I will expect further weakness until this swing reverses.

Market moving events for the next few trading days:

• Tuesday: Auto-Truck Sales, Pending Home Sales
  -Earnings: Avon, Cummins, DR Horton, Tyco, UPS
• Wednesday: ISM Services, Crude Inventories
  -Earnings: Kraft, Clorox, Lazard, Novellus, THQ
• Thursday: Initial Claims, Factory Orders
  -Earnings: Bunge, Cigna, JDS Uniphase, Verisign
• Friday: Employment Report!
  -Earnings: Biogen Idec, Hillenbrand, Weyerhaeuser
• Monday: No economic reports.
  -Earnings: Beazer, Whirlpool, Sohu, Vodafone

***Major-index ETFs***

***Medium-term Trend*** We're on a road to nowhere. QQQQ, SPY and IWM have gone nowhere since 10-October. Since early December, the major-index ETFs have been range bound with 12-20% trading ranges. The blue trendlines show a triangle type consolidation taking shape. After a new low in November, the recovery and triangle consolidations alleviated oversold conditions. Now what? Technically, a triangle breakout is required for the next directional clue. However, buying on resistance breaks and selling on support breaks does not offer a good risk-reward ratio. In fact, trading remains so choppy that buying and selling in such a manner simply increases the chances of whipsaw. Strong trends are required to buy resistance breaks and sell support breaks. As such, I am focused on the 60-minute charts to catch the swings within the triangle. This requires extra trading and focus, but it is the best way to control risk at this point. The alternative is simply to stay on the sidelines until the dust settles.

***Short-term Trend*** On the 60-minute chart, QQQQ, SPY and IWM firmed with rising flags and wedges on Monday. The prior decline was quite sharp and some sort of bounce or consolidation is normal at this stage. Moreover, rising flags and wedges are typical for bearish consolidations. A break below flag/wedge support would signal a continuation lower and target a test of the January lows. For now, QQQQ, SPY and IWM remain below resistance zones and I still consider the current swing down. There is a chance that these oversold bounces extend further towards the resistance zones. Watch volume on breadth to determine the robustness of any rally. It is, after all, turnaround Tuesday. It is also worth noting that QQQQ is holding up better than IWM and SPY. QQQQ retraced 62% of the prior advance (21-28 Jan) and this is the shallowest of the declines. Should the stock market bounce on Tuesday, I would expect QQQQ to lead higher.

***Inter-Market Charts***

***Dollar*** The US Dollar Index Bullish ETF (UUP) is struggling near resistance again. Resistance around 26 stems from the 62% retracement and broken support. UUP first hit this resistance level in mid January. After a sharp decline early last week, the ETF recovered with a surge back to resistance late last week. The overall trend is up since mid December and I am watching key support at 25.3 for a medium-term reversal. Failure at resistance and a break below 25.3 would signal a continuation of the Nov-Dec decline. This is the first level to watch for a failure at resistance. A break below this level would provide the first sign of weakness. Euro Trust ETF (FXE) is finding some support around 128, but has yet to actually bounce. Look for a move above 130 to signal a bounce that could lead to a bigger resistance breakout. On the 30-minute chart, UUP stalled over the last two days. I am marking short-term support at 25.7.

***Gold*** Despite weakness in the Dollar on Monday, gold also declined on the day. The streetTRACKS Gold ETF (GLD) surged to resistance and then formed a shooting star on Monday. These are potentially bearish candlestick reversal patterns that require confirmation with further weakness. At this point, a consolidation or even a small dip would be considered normal. GLD was short-term overbought after Friday's close above 90 and trading in a resistance zone. The medium-term trend is clearly up as GLD advances within a rising channel. I would expect support around 85-87 on any pullback. This support zone is clear on the 30-minute chart. Broken resistance and flag support combine to firm a support zone here.

***Oil*** The United States Oil Fund ETF (USO) opened weak on Monday, but firmed and formed a doji on the day. This doji near resistance keeps the double bottom alive, though not exactly kicking. Before anticipating a bottom here, a bounce off support is needed show some buying interest. On the 30-minute chart, USO broke triangle support with a gap down last week and remains under pressure. I am lowering short-term resistance to 31. A recovery above this level would be impressive enough to revive the double bottom theory.

***Bonds*** Bonds finally got a bounce as the iShares 20+Yr T-Bond ETF (TLT) edged above 105 on Monday. On the daily chart, TLT found support at the 62% retracement mark with a modest white candlestick. While the trend since mid December is down, the trend since mid November is up. This makes the Dec-Jan decline a correction within a bigger uptrend. A move above 110 would break the channel and renew the bigger uptrend. On the 30-minute chart, TLT firmed around 104 and broke resistance at 105 with an afternoon move. It was not the strongest of moves, but it is a start. A move back below 104 would negate this mini-breakout and put the downtrend back in play. Fundamentally, the outlook for bonds is mixed. Further weakness in the stock market could push money towards bonds as a flight to safety. Bonds could fall again if stocks strengthen. There are also supply concerns over the coming months as the US government spends money for TARP and embarks on $800 billion stimulus plan. The money has to come from somewhere. This means the government will need to sell lots of bonds. More supply could put downward pressure on prices in the coming months.

Good day and good trading -Arthur Hill

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Disclaimer: Arthur Hill is not a registered investment advisor. The analysis presented is not a solicitation to buy, avoid, sell or sell short any security. Anyone using this analysis does so at his or her own risk. Arthur Hill and TD Trader assume no liability for the use of this analysis. There is no guarantee that the facts are accurate or that the analysis presented will be correct. Past performance does not guarantee future performance. Arthur Hill may have positions in the securities analyzed and these may have been taken before or after the analysis was present.
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About: The Daily Swing is posted every trading day around 6AM ET and focuses on short-term strategies for QQQQ, SPY and IWM. In addition, at two stock setups are featured every day with a detailed trading strategy. As warranted, coverage extends to broad market topics, key sectors and industry groups and inter-market securities (gold, bonds, the Dollar and oil).
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Sources: Data from Bloomberg.com, CBOT.com, Kitco.com and ino.com; Charting from Metastock (equis.com). Closing data from Reuters.com, eSignal.com, MS QuoteCenter and Yahoo! Finance.