***Executive Summary***

• Stock Market Stance Remains Neutral
• Broad Market Advance
• Above Average Volume for Two Days
• QQQQ Challenges January High
• SPY and IWM Break Short-term Resistance
• UUP Backs off Triangle Resistance
• GLD Stalls in Resistance Area
• USO Fails to Hold Intraday Gain
• TLT Forms Doji in Downtrend (video link)

***Stock Market Stance*** Neutral on 29-January. Even though I can make the argument for further strength over the next few weeks and months, the bulls look tentative and this could produce a choppy-grinding advance. Moreover, I still consider this a bear market rally. SPY is currently trading around 87. A move to the November high around 100 would produce a 13 point (15%) gain from current levels. Not bad for a bear market rally. With key support at 81, SPY is 6 points (7%) from reversing the current uptrend. 6 points risk for 13 points gain is not too bad when trading in harmony with the primary trend. However, the primary trend is down and this calls for a better risk-reward ratio. At the very least, this calls for less risk. I remain a slave to the swings. The current swing is up with breakouts in the major-index ETFs over the last two trading days. I have set swing support at the Thursday afternoon lows and will remain short-term bullish as long as these hold.

Market moving events for the next few trading days:

• Monday: No economic reports.
  -Earnings: Beazer, Whirlpool, Sohu, Vodafone
• Tuesday: Geithner Speaks, Bernanke Speaks
  -Earnings: Elan, MolsonCoors, NVIDIA, Web.com
• Wednesday: Crude Inventories
  -Earnings: Agrium, Level3, PF Changes, Cymer
• Thursday: Retail Sales, Jobless Claims
  -Earnings: Aetna, Borg Warner, Marriott, Dryships
• Friday: Consumer Sentiment
  -Earnings: Abercrombie, PepsiCo, Cognizant Tech

***Technical Highlights***

***Broad Market Surge*** Stocks surged with a broad move that lifted most boats. All sectors were higher with financials jumping over 7%. For the S&P 1500 ETF (ISI), AD Net% surged to +83% and AD Volume Net% reached +86%. While short of positive breadth extremes (> +90%), Friday's action was most impressive. QQQQ was exceptionally strong last week as AD Net% and AD Volume Net% surpassed +50% three of five days. However, even QQQQ breadth failed to surpass +90% last week. The inability to reach positive breadth extreme shows tentativeness among the bulls.

***Volume Remains Above Average*** Nasdaq and NYSE volume levels were above average for the second day in row. However, exchange volume on Friday was below the levels seen on Thursday. With a strong open and strong close on Friday, I would have expected volume to be the highest of the week. This small drop in volume also reflects tentativeness among the bulls. SPY and DIA volume levels were also above average on Friday, but QQQQ and IWM volume levels were below average.

The blue lines show the current swings. There have been three swing reversals in the last three weeks (red box). I am marking swing support at 5200 for the NY Composite and at 1500 for the Nasdaq. A break below these levels would reverse the current upswing.

***Major-index ETFs***

***Medium-term Trend*** The medium-term trends remain up as QQQQ broke above the late January high. SPY and IWM also surged over the last two days, but both have yet to break their January highs. In addition, QQQQ is the only one to break above the upper trendline of the triangle formation. QQQQ clearly shows relative strength at this stage. I consider the medium-term trend up because all three found support well above their late November lows. In addition, all three found support above their late January lows in early February. The gray trendlines were drawn parallel to the Nov-Jan trendline. A rising price channel could be unfolding as the major-index ETFs prepare for a move towards the upper trendline.

***Short-term Trend*** SPY and IWM broke swing resistance and all three ETFs are now in short-term upswings. It all started with an impressive recovery after Thursday's gap down. The major-index ETFs recovered immediately after the gap and followed through with resistance breakouts. The major-index ETFs are now up 6-9% in five days and 2-period RSI on the daily charts is above 90 for QQQQ, SPY and IWM. The major-index ETFs are short-term overbought at this stage and ripe for a pullback or consolidation. On the 60-minute chart, I am marking support zones based on the Thursday afternoon lows and resistance breakouts. A pullback to the top of these zones would improve the risk-reward ratio for new long positions. A break below key support (Thursday afternoon low) would reverse the current upswing and start a new downswing. Yep, I am still singing the Whipsaw song.

***Inter-Market Charts***

***Dollar*** Despite Friday's decline, the medium-term trend remains up for the US Dollar Index Bullish ETF (UUP). The ETF has been consolidating within a triangle the last few weeks. A break below support at 25.3 would definitively reverse the uptrend. On the 30-minute chart, UUP broke the (smaller) triangle trendline, but remains above short-term support at 25.6. No signal here. Look for a break above 26 for a bullish signal and a break below 25.6 for a bearish signal. With a decline in the Dollar, the Euro Trust ETF (FXE) bounced, but did not close very strong and remains below minor resistance at 131, not to mention key resistance at 133. No chances of a trend change until FXE breaks above 131.

***Gold*** The streetTRACKS Gold ETF (GLD) has been moving opposite the Euro lately. With weakness in the Dollar and strength in the Euro, GLD edged lower on Friday. Medium-term, GLD has been consolidating near resistance around 90. The overall trend remains up, but GLD still looks vulnerable to a trading range or pullback to digest the prior surge from 80 to 92. On the 30-minute chart, GLD broke flag resistance and then traded flat the last 2-3 days. Broken resistance turns into support and a move below 88.5 would clearly negate the flag breakout. I would then expect a retracement of the prior advance and GLD could correct towards the mid 80s.

***Oil*** The United States Oil Fund ETF (USO) surged during the day on Friday, but failed to hold its gains and closed near its lows for the week. Boo hiss. This failed surge reinforces resistance around 30. While the double bottom remains a possibility, USO has yet to produce a convincing advance off support. The medium-term trend is still down and the pattern at work looks more like a descending triangle. On the 30-minute chart, USO gapped down on Friday morning and then filled the gap with a big surge in the afternoon. The ETF met resistance in the 29.5-30 area and closed below 28.5 on Friday. Short-term resistance remains at 30.2 and a trend change is impossible without a breakout.

***Bonds*** Despite the employment report on Friday, bonds did not move much and the iShares 20+Yr T-Bond ETF (TLT) finished with a doji on the day. On the daily chart, TLT is trying to firm in a support zone bound by broken support and the 62% retracement mark. The ETF is short-term oversold after a plunge from 110 to 102 and firming, but shows no signs of actual strength. As far as the medium-term trend is concerned, a break above 110 is needed for a full reversal. On the 30-minute chart, I am marking short-term resistance at 104. With the employment report out of the way, a surge above this resistance level would be enough to reverse the short-term downtrend and perhaps anticipate a medium-term breakout.

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.