***Executive Summary***

• Stock Market Stance Remains Neutral
• Breadth Finished Weak (Except for QQQQ)
• Volume Surges in Final Hour
• News Drives the Bears Crazy
• QQQQ Holds Short-term Uptrend
• IWM and SPY Firm At Triangle Support
• UUP Breaks Triangle Resistance
• GLD Stalls with a Doji
• USO Remains Below Support Break
• TLT Stalls After Gaps (video link)

***Stock Market Stance*** Neutral on 29-January. Other than the swing reversals, there is no change in my overall trading stance. Trading remains treacherous, news driven and very short-term. My limited trading remains focused on the swings because we are seeing swings greater than 3% every few days. With yesterday's late reversal, the current swing is now up and I am marking support based on yesterday's lows. However, inability to follow through today would be quite negative. In fact, the first dip below yesterday's close would give me enough reason to jettison longs ahead of a three day weekend.

Medium-term, 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, Tuesday's decline could have been an overreaction as emotions were running high.

Market moving events for the next few trading days:

• Friday: Consumer Sentiment
  -Earnings: Abercrombie, PepsiCo, Cognizant Tech
• Monday: Presidents Day Holiday
  -Earnings: Presidents Day Holiday
• Tuesday: Empire State Manufacturing Index
  -Earnings: Agilent, Fossil, Medtronic, Wal-Mart
• Wednesday: Crude Inventories, Housing Starts, FOMC Minutes, Industrial Production
  -Earnings: Dollar Tree, Garmin, Toll Brothers, TJX
• Thursday: Jobless Claims, Producer Price Index (PPI), Leading Indicators
  -Earnings: GM, Hormel, MGM Mirage, Sprint, Tesoro
• Friday: Consumer Price Index (CPI)
  -Earnings: Barrick, JC Penney, Lowe's, Tim Hortons

***Technical Highlights***

***Breadth Ends Unimpressive*** The stock market mounted a big recovery in the final hour, but the final breadth results were unimpressive. Six of the nine sectors finished positive. Only two gained more than 1% (materials and healthcare). Within the S&P 1500 ETF (ISI), AD Net% ended at +15% and AD Volume Net% finished at –5%. New 52-week lows expanded as Net New Highs finished at –6%. Breadth did not even come close to a positive breadth extreme (greater than +90%). It goes without saying, medium-term breadth remains in bear mode. Of note, QQQQ breadth finished the strongest of the major-index ETFs. AD Net% and AD Volume Net% both surpassed +45%. QQQQ continues to show relative strength.

***Volume Surges in Final Hour - Again*** The next chart shows 30-minute bars for the S&P 500 ETF (SPY). Since 30-January, I count five (positive) volume surges in the final 30-60 minutes of trading (black arrows). Note that the volume bars dip lower because they cover trading from 4 to 4:20. SPY trading extends past the closing bell on the NYSE and Nasdaq. Even though the bulls have not made much headway the last two weeks, these positive, and late, volume surges certainly stack the deck against the bears. Yesterday's volume surge was not quite as strong as Tuesday's negative volume surge. However, it is important to note that SPY filled the gap and actually surged on big volume. A low volume surge would not be considered robust. High volume validates Thursday's late surge.

***News Driven Market*** The next chart extends back to mid January and shows four news driven pops. The Gheitner confirmation pop occurred on 21-Jan and extended until the bad bank pop on 28-Jan. After a pullback, there was another pop based on hopes for passage of the stimulus plan. Once again, SPY fell back to its mid January levels and then we had the mortgage relief pop yesterday. A news driven bounce off support looks like a valid bullish play. However, be careful of news driven surges when the market is already up substantially. It will also be interesting to see what happens when cooler heads prevail today.

***Major-index ETFs***

***Medium-term Trend*** The major-index ETFs remain with a split decision. SPY, IWM and DIA are in downtrends, but QQQQ remains in an uptrend. All three opened weak, moved lower intraday and then surged to close strong. For QQQQ, the December-February lows mark a support zone around 28-30. Even though QQQQ did not exceed its late January high this week, there is clearly an upward bias since the late November low. This bias is not strong because trading has been pretty flat since the initial move above 30 in early December. IWM and SPY broke down in mid January and pretty much stayed down. Neither came close to its early January high and both formed triangle consolidations the last few weeks. There is a lot of support from the late January and early February lows. IWM has support around 43-45, while SPY has support around 80-82. Despite these support zones, I still have a bearish bias for SPY and IWM. Both are underperforming and the triangles look like bearish consolidation patterns. Triangle support breaks would signal a continuation lower. What happens within the triangles is anybody's guess.

***Short-term Trend*** QQQQ, SPY and IWM were on the verge of support breaks in the late afternoon, but the final hour pop reinforced support and reversed the two day downswing. QQQQ remains in an uptrend overall, while IWM and SPY have traded flat the last few weeks. With the break above minor resistance, QQQQ is forging a higher low and keeping the uptrend alive. Failure to hold this breakout and a move below yesterday's low would be short-term bearish. IWM and SPY found support near the early February lows. Both were on the verge of support breaks in the late afternoon, but the last hour surge pushed both above short-term resistance. The swing is now up for both ETFs. Support from the February lows has been reinforced with yesterday's reversals and a break below these levels would be bearish.

***Inter-Market Charts***

***Dollar*** The US Dollar Index Bullish ETF (UUP) edged above 26 with a small black candlestick on Thursday. Technically, the breakout is bullish and signals a continuation of the Dec-Jan advance. Despite the triangle breakout, there is still a lot of resistance around 26 from the late January and early February highs. In addition, the breakout was a bit hesitant as the ETF stalled after a strong open. On the 30-minute chart, UUP broke above 26 and then oscillated around this level. UUP clearly shows more strength than weakness right now and the odds favor further strength after the breakout. Watch for a move below 25.8 to challenge the triangle breakout. While UUP broke triangle resistance, the Euro Trust ETF (FXE) broke flag support with a move below 128 intraday. FXE recovered somewhat, but shows more weakness than strength right now. I am lowering key resistance to 131 and it would take a move above this level to reverse the current downtrend.

***Gold*** Gold extended its gains on Thursday, but finished the day with an indecisive candlestick (doji). While the trend is clearly up, GLD is short-term overbought as RSI(2) moved above 90. I am not turning bearish on bullion, however, the odds favor a consolidation or a pullback. A lot could depend on the stock market. Weakness in stocks and instability in the financial system would benefit gold. However, strength in stocks and increasing confidence in the financial system could weigh on gold. On the 30-minute chart, GLD is holding the triangle breakout and broken resistance turns into support around 88.5. A strong breakout should hold and a move below this level would challenge the breakout. The late January and early February lows mark a bigger support zone around 86.

***Oil*** No change. 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) remains in a medium-term downtrend, but the short-term trend is up. On the daily chart, TLT remains within a falling channel with the upper trendline marking the first resistance level around 107. So far, the surge over the last few days just reinforced medium-term support. It has not been enough to fully reverse the medium-term downtrend. After the 2-3 day surge above 106, TLT became short-term overbought as RSI(2) exceeded 90. On the 30-minute chart, the bulls are about to get their first test with Tuesday's gap marking the support zone. Strong breakouts and gaps should hold. Broken resistance turns into support around 104 and the gap marks support to 102.5. Combined, this argues for a support zone that needs to hold. A move back below 104 would be negative, while a filling of the gap with a move below 102.5 would be a bearish development.

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.