The Trader Daily

 | Apr 23, 2014 | 7:30 AM EDT
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The major indices have all surged over the past six days. But since the Nasdaq was the only of our major indices to violate its early-February low, I want to begin today's report with a review of the PowerShares QQQ (QQQ).

The QQQ is still in a longer-term uptrend, but it is currently plagued by a series of lower highs and lower lows. It's for this basic reason that I believe aggressive traders should be stalking a short in the QQQ toward $88.30/$88.60. As you review the chart below, note the location of the short-term downtrend line, the 50-day moving average and the overbought nature (in the context of a downtrend) of the stochastics. All evidence suggests sellers are lurking in the shadows.

Powershares QQQ Trust (QQQ) Daily Chart
Source: eSignal

I highlighted Peabody Energy (BTU) yesterday -- and, in light of its resiliency in the face of Arch Coal's (ACI) horrid earnings report, I thought I'd dig a bit deeper into the sector. My search ended with Joy Global (JOY), as this stock currently represents 7% of the Market Vectors Coal ETF (KOL).

The daily chart of Joy, unlike much of the coal sector, is a thing of beauty. In fact, while Peabody and Arch are still trying to find their footing, the chart of Joy more closely resembles the daily chart of Caterpillar's (CAT) from a couple months ago. In my view, a break above $62.25 would put the $69-to-$70 within reach.

Joy Global (JOY) Daily Chart
Source: eSignal

I haven't traded Cliffs Natural Resources (CLF) in several months, but ever since Axiom Capital downgraded the stock on March 10 and triggered an exhaustion gap, I've had my eye on it. There's no denying that Cliffs' daily chart looks atrocious, but I believe that could change with relatively little effort.

As you review the chart below, keep in mind that an increasing number of traders and investors are recognizing the weakness in early cycle sectors (home building and financials), and strength in late cycle sectors (energy, materials, durables, utilities and healthcare). Suffice it to say this sort of shift could benefit beaten down material stocks like Cliffs.

I have no plans to rush out and buy Cliffs tomorrow. But the potential for the stock to put in a higher lower -- along with a bullish divergence in the moving-average convergence-divergence (MACD) line and relative strength index (RSI) -- is reason enough to put this stock on your radar. I suspect we'll be circling back to this one in the not-too-distant future.

Cliffs Natural Resources (CLF) -- Daily
Source: eSignal

From its low on April 11 to the high on April 22, the SPDR S&P 500 (SPY) has bounced 7 handles. But as much as the SPY is in need of a multi-day breather, any short-selling should be reserved for day time frame scalpers or aggressive swing traders. The bottom line is that SPY could trade back down into the mid-$185.50 area on a day time frame basis, and still remain solidly bullish.

With the above in mind, I expect short-term traders to remain generally bullish as long as dip buyers remain active between $187.35 and $187.75. All trading above $187.75 would keep the focus on $188.85, $189.55 and new all-time highs. Only once price support near $187.35 collapses will short-term and day time frame traders begin adopting a more bearish posture.

SPY -- 15-Minute Volume Profile
Source: eSignal

Additional Notes:

1. As posted in Tuesday's report, and again in the comments section beneath the report, I sold the remainder of my iShares Biotechnology ETF (IBB) position into $235.

2. That which has been strongest -- energy, staples and utilities -- failed to participate in Tuesday's advance. Of the three sectors, energy appears the most extended and in need of a more prolonged rest.

Any trading- or volume-profile-related questions can be posted in the comments section below, emailed to me at or posted to my twitter feed @ByrneRWS

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