***Executive Summary***

• Stock Market: Medium-term Bullish, Short-term Bearish
• XLF, XLY and XLK Hit Resistance
• SMH and HHH Show Leadership
• IGN Hits Retracement
• QQQQ, SPY and IWM Stall at Overbought Levels
• SPY Holds Monday's Gap
• UUP Recovers after Early Hit
• GLD Moves Inverse to Dollar
• USO Stalls Near Flag Trendline
• TLT Remains Range Bound
• ETF Stock Setups Video by 8:30AM (video link)

***Stock Market Stance*** No change. Medium-term Bullish and Short-term Bearish. Even though I am looking for a correction or consolidation over the next 1-3 weeks, we could see pent up demand for stocks over the next few days. Fund managers will be under pressure to show positions at the end of the quarter. In addition, the short-term trends are still up and there are no signs of weakness yet. A short-term bearish stance is risky right now and it make take another week for a pullback to unfold.

The medium-term evidence turned bullish on 13-March. There were positive breadth extremes on 10, 12, 17 and 23 March. The VIX and VXN broke support levels as confidence increased in the market. The financial, consumer discretionary and technology sectors led the way during the March surge. Fundamentally, the Fed and Treasury are throwing all kinds of money into the system and the big stimulus package is coming on board.

Market moving events for the next few trading days:

• Thursday: GDP, Jobless Claims, Gheithner Speaks
  -Earnings: Best Buy, Conns, Fred's, Gamestop, Heelys, TIBCO
• Friday: Consumer Sentiment
  -Earnings: Finish Line, KB Home
• Monday: No economic reports
  -Earnings: Layne Christiansen, Oxford Industries
• Tuesday: Case-Shiller, NAPM Chicago, Consumer Confidence
  -Earnings: Gigamedia, Lennar, Steelcase, BH Fuller, Sealy
• Wednesday: ISM Mfg, Construction Spending
  -Earnings: Worthington, TechTarget, Unifirst

***Technical Highlights***

***Lots of Resistance*** Many key sector and industry group ETFs are trading near key resistance or key retracements. In addition they are overbought after big gains and many momentum oscillators confirm overbought conditions. Even though securities can become overbought and remain overbought, current conditions are more favorable for a pullback or choppy consolidation. The Technology SPDR (XLK), Financials SPDR (XLF) and Consumer Discretionary SPDR (XLY) are meeting resistance from the early February highs. In addition, XLY and XLF are also meeting resistance from the 50-62% retracement zones. Even thought the March surge was exceptionally strong, buying in resistance zones and overbought conditions is not the way to play right now. Notice that XLY surged 34% from late November to early December. This surge gave way to a choppy trading range and then a failed breakout in early January.

The next three charts show three technology ETFs. The Semiconductor HOLDRS (SMH) is meeting resistance from its Dec-Feb highs. The Internet HOLDRS (HHH) is meeting resistance from its Nov-Feb highs. The Networking iShares (IGN) is stalling near the 62% retracement and broken support. All three are overbought after big moves. Also of note, SMH and HHH show relative strength because they are trading near their 2009 highs. IGN is lagging technology because it remains near its 62% retracement.

***Major-index ETFs***

***Medium-term Trend*** QQQQ, SPY and IWM stalled on Wednesday and there is no change in the analysis. Harami patterns formed on Monday-Tuesday and indecisive candlesticks formed on Wednesday. These indecision candlesticks just continue the indecision generated by the harami. After Monday's long white candlestick, the major-index ETFs formed smaller black candlesticks and Tuesday's range was within Monday's range. It is also known as an inside day. Harami show sudden indecision that can foreshadow a short-term trend reversal. We already know that the major-index ETFs are overbought, while SPY and IWM are trading in retracement zones. The red rectangles mark a 38-62% retracement of the Jan-Mar decline. QQQQ is meeting resistance from the Jan-Feb highs. It is a tough call currently because securities can become overbought and remain overbought in strong uptrends. Moreover, we have the issue of window dressing in the coming days. I still think the March surge marks the beginning of an extended advance, but the odds favor a pullback or consolidation in the next 1-3 weeks.

***Short-term Trend*** The bulls mounted a pretty strong recovery in the final hour of trading. Notice that all three ETFs held Monday's gap by reversing near the gap zone. This reinforces gap support. Because of yesterday's late window-dressing rebound, I am setting one short-term support level based on the afternoon lows. If this recovery has legs, then these lows should hold. A break below the afternoon lows would show weakness and target a deeper pullback. Technically, the short-term trend is up as long as these support levels hold.

***Inter-Market Charts***

***Dollar*** The Dollar took a big hit just before 10AM as Geithner failed to reinforce the Dollar as the world's reserve currency. The Dollar recovered most of its losses by 11AM and settled into a tight trading range. So far, the morning dip is just a fluke based on jittery currency markets. A shift away from the Dollar as the world's reserve currency would be slow and take time. It would not happen overnight. Moreover, there is not much the Treasury can do about it. I thought the Dollar held up pretty good considering the events of the last few days. On the price chart, the US Dollar Bullish ETF (UUP) remains with a rising flag and I adjusted my break level based on yesterday's volatility. I will now set minor support at 25 and a break below this level would signal a continuation lower. The Euro ETF (FXE) has a falling flag working and a break above 137 is needed to signal a continuation higher.

Those ragging on Geithner may want to consider an old Indian proverb: Do not pass judgment until you have walked two moons in his moccasins. Most Treasury secretaries, and presidents for that matter, are still finding their way around the building after two months. Geithner plunged right into a raging financial fire and his department is not fully staffed. The guy is working day and night to get us out of this mess. I certainly would not want his job. Geithner should not get caught up in every news bite in this 24 hour news cycle. Moreover, he will have time to deal with international currency issues at the G-20 meeting next week.

***Gold*** Gold got a bounce as the Dollar dipped on Wednesday. On the daily chart, GLD surged off support last week, but fell back to trendline support. A doji formed right at the Oct-Nov trendline on Tuesday and the ETF firmed further on Wednesday. This is where GLD needs to hold. A break below 90 would negate the bullish engulfing and show medium-term weakness. On the 30-minute chart, I did some redrawing to take into account yesterday's bounce. There was a breakout around 90-91 last week and this area turns into support. In addition, a 50-62% retracement of last week's surge confirms support in this area. Yesterday's bounce is positive, but a rising flag or wedge could be taking shape. A break back below 91 would be the first negative on the 30-minute chart.

***Oil*** There is still no change in the United States Oil Fund ETF (USO). The ETF remains in a short-term uptrend and medium-term downtrend. The advance over the last few weeks looks like a rising flag, which is potentially bearish. USO became short-term overbought as RSI(2) moved above 90 on Monday. In addition, USO is trading near resistance from the upper trendline of the rising flag. Looks like time for a pullback. On the 30-minute chart, USO has been edging higher the last four days. First support is set at 31 for top pickers.

***Bonds*** No change. With the target dates ranging from March 2011 to February 2039, the Fed will purchase maturities from 2 years to 30 years over the next few days. That doesn't help much. In fact, this may create more confusion in the bond market. The iShares 20+Yr T-Bond ETF (TLT) surged Tuesday, but fell back on Wednesday and remains range bound on the daily chart. No definitive direction here. Chinese threats and US financing needs are pushing prices lower, while Fed purchases are pushing prices higher. The Fed may win the battle, but it will loose the war. On the 30-minute chart, TLT did not hold the surge above 104 and trading remains very choppy.

Good day and good trading -Arthur Hill

---------------------------------------------------------------
Click here to post a comment, suggestion or question.

Breadth Charts ---------------------------------

---------------------------------------------------------------
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.
--------------------------------------------------------
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).
--------------------------------------------------------
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.