***Executive Summary***

• Stock Market Stance Remains Neutral
• QQQQ Backs off January High
• IWM and SPY Test Triangle Support
• UUP Challenges Triangle Resistance
• GLD Holds Triangle Breakout
• USO Sinks on Supply-Demand Dynamics
• TLT Gaps Up for Second Day Running
• Stock-ETF Setups at 7:30AM (video link)

***Stock Market Stance*** No change. Neutral on 29-January. I am tempted to turn bearish, but trading remains erratic and trend-less. At this point, the bulk of the medium-term evidence favors the bears. First, there were double negative breadth extremes on 14-Jan, 20-Jan and 10-Feb. A double negative breadth extreme occurs when both AD Net% and AD Volume Net% exceed –90% for the S&P 1500 ETF (ISI). Second, eight of nine sectors were down more than 3% on Tuesday and volume expanded on the downside. Broad selling pressure on expanding volume is not bullish. Third, IWM, SPY and DIA are in downtrends and show relative weakness – especially DIA. QQQQ and techs shows relative strength, but you cannot ride a one legged bull. There are three things that keep my stock market stance neutral. First, the major-index ETFs have gone nowhere since 10-Oct. Trading remains very choppy and treacherous. Second, buyers continue to be enticed by the parade of rescue packages. Third, yesterday's decline could have been an overreaction as emotions were running high. My trading remains focused on the swings because we are seeing swings greater than 3% every few days. The current swing is down and I have marked swing resistance levels on the 60-minute charts. However, 10-minute charts and an intraday watch are required to catch these swings in a timely manner.

Market moving events for the next few trading days:

• Thursday: Retail Sales, Jobless Claims
  -Earnings: Aetna, Borg Warner, Marriott, Dryships
• Friday: Consumer Sentiment
  -Earnings: Abercrombie, PepsiCo, Cognizant Tech
• Monday: Presidents Day Holiday
  -Earnings: --
• Tuesday: Empire State Manufacturing Index
  -Earnings: Agilent, Fossil, Medtronic, Wal-Mart
• Wednesday: Crude Inventory, Housing Starts, FOMC Minutes
  -Earnings: Dollar Tree, Garmin, Toll Brothers, TJX

***Major-index ETFs***

***Medium-term Trend*** There is no change in the medium-term analysis as the major-index ETFs stalled with indecisive candlesticks yesterday. IWM and SPY formed doji near triangle support. After Tuesday's sharp decline, some indecision is normal as the market decides what to do next. Downside follow through would break triangle support to signal a continuation of the January decline. This would target a move towards the late November low. Given the rising wedge break and support break, the odds favor a downside break and test of the November low. If SPY and IWM break down, QQQQ is unlikely to hold up on its own. QQQQ remains with a rising wedge, but reversed off resistance from the early January high. At the very least, a support test around 28-29 looks likely.

***Short-term Trend*** QQQQ remains in 3-4 week uptrend, while SPY and IWM are trading within triangle consolidations since mid January. The swing within these patterns is down after Tuesday's plunge. All three hit support zones yesterday and consolidated with choppy trading. There were a couple of stimulus-bailout induced buying pops, but no sign of consistent buying. What happens after these consolidations will provide the next directional clue. A break above yesterday's high would reverse the downswings and reinforce support. Failure to breakout and a move below yesterday's low would argue for a continuation of Tuesday's plunge. This would increase the odds of triangle support breaks on the daily charts, which in turn could lead to an acceleration lower. As a slave to the swings, the thin red lines mark swing resistance levels just above yesterday's high. Watch these levels to reverse the current downswing and start another upswing.

***Inter-Market Charts***

***Dollar*** The US Dollar Index Bullish ETF (UUP) edged higher on Tuesday and there is no change in the basic analysis. The medium-term trend remains up as UUP consolidates with a triangle formation. The ETF bounced off support for the third time in five weeks, but has yet to follow through with a resistance breakout. On the 30-minute chart, the noose is tightening as the triangle narrows. Look for a break above 26 to signal a continuation higher and a break below 25.3 to reverse the bigger uptrend. The Euro Trust ETF (FXE) remains under pressure as the news out of Europe is possibly even worse than the news out of the US. Fortis shareholders voted against the takeover by BNP Paribas. This leaves the Belgian government stuck with a big insolvent bank. The European Central Bank (ECB) also admitted that the financial crisis and recession were worse than expected. No kidding. FXE remains in a downtrend overall with a small rising flag over the last eight days. A flag support break would extend the downtrend, while a break above 133 would fully reverse the downtrend.

***Gold*** Gold continues to rally and show upside leadership. Money is moving towards gold as an alternative to uncertainty in the currency and stock markets. On the daily chart, the streetTRACKS Gold ETF (GLD) was trading in the middle of its rising price channel on Tuesday. With yesterday's surge, it looks like GLD is making a move towards the upper trendline, which extends to around 100 by the end of the month. That translates into $1000 for gold. Yes, they will ring a bell if gold hits a grand. On the 30-minute chart, GLD broke triangle resistance on Tuesday and extended its gains on Wednesday. Broken resistance at 90 turns into support and a move back below 89.5 would negate this breakout. However, the big trend would still remain up and I am marking a support zone around 87-88.

***Oil*** Oil remains under pressure as inventories rise and demand weakens. It is a lethal combination that is keeping downward pressure on prices. Continued strength in the Dollar and Tuesday's sharp stock market decline are not helping matters either. The United States Oil Fund ETF (USO) broke below its December lows and shows no signs of sustainable buying interest. USO never recovered after the 27-Jan gap. The February highs and late September trendline combine to mark the first resistance level at 30.2. The 30-minute chart confirms this resistance zone. USO failed numerous times in the 29-30 area over the last few weeks. Only a strong break above 30.2 would reverse the short-term downtrend.

***Bonds*** The iShares 20+Yr T-Bond ETF (TLT) continued to benefit from apprehension over the bank bailout plan. Most pundits suggested that the market did not like the lack of detail in the package. Perhaps, the market did not like the idea of a stress test for bank solvency, which would most likely put a few banks out of business and involve more pain. Some of these banks need to be put out of their misery. The sooner, the better. The iShares 20+Yr T-Bond ETF (TLT) surged for the second day running and is becoming short-term overbought already. 2-period RSI moved above 90 and the ETF is approaching its January trendline. This is not necessarily bearish, but it does increase the odds of a pullback or a stall. A lot could depend on the stock market. Should stocks fall further, I would expect bonds to move higher in a flight to safety. On the 30-minute chart, TLT gapped up two days in a row and held the gap. Three down gaps marked the mid January reversal. I will keep my support zone around 102.5-104 for now. A move back into this zone would challenge the breakout and a move below 102.5 would totally negate it.

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.