Stocks got off easy last Friday. Most folks were looking for a non-farm payroll figure for November of around 200,000, but it came in at 263,000. Add to that the average hourly earnings rose by 0.6 % versus a consensus estimate of 0.3 %, and again, the stock market got off easy.
All the equity index ETFs gained ground last week. Still, we finally see the Dow Jones Industrial Average beginning to slow as the Dow gained significantly less than the S&P 500, Nasdaq and Russell 2000. Helene Meisler has been discussing the potential vulnerability of the DJIA in recent posts, and I agree.
Suppose I were long or stalking a short in the SPDR Dow Jones Industrial Average ETF (DIA) . In that case, I'd measure my risk against a close beneath the rising 10-day exponential moving average (EMA). I don't like to guess when a trend will break versus bend, but given the DIA has bounced off its 10-day EMA a handful of times since mid-October, it seems like a reasonable yardstick to measure the short-term trend against.
As suspicious as I am about the DIA maintaining its bull trend, I like the look of the iShares Russell 2000 ETF (IWM) , and if I'm learning long, that's where I'm focusing my time.
The cluster of short and longer timeframe moving averages on the IWM between $180 and $185 is easy to see. With that lower blue moving average, the volume-weighted average price anchored to the Oct. 13 bullish reversal, acting as your last-ditch support, I suspect a break above $190 will attract attention. I don't know how long WM can maintain strength above $190, so, don't get carried away with your position size.
I received a few questions on the iShares 20+ Year Treasury Bond ETF (TLT) after I mentioned selling calls against my position. My logic is pretty simple.
I never expected TLT to retrace its way to that yellow downtrend line and the 100-day simple moving average (SMA) as quickly as it has. Pair that with the 14-period Relative Strength Index (RSI) rising above and sitting around 80, and I decided some selling or hedging made sense.
I opted to sell calls (rather than the position) because I'm not opposed to holding TLT a while longer. I suspect we will see $120 over the next few months, but I've also had $105-$106 and $110 penciled in as possible near-term stall points.
