You can feel the tension between the two camps, both bull and bear, as we near a turning point in the market. Will we break lower and finally get a washout? or, will the Bulls pull the ultimate squeeze on the bears and rip us to new 52 week highs before year end?
Only time will tell, but what I do want to watch here is which way the $IYR will break. The IYR has been a great tool in spotting divergences and predicting market direction. Currently, the IYR is having trouble breaking and staying above the 50 day MA, which is a bearish signal. If the IYR decides to break lower here, there is no way I want to be long stocks. However, should the index hold firm here and regain the 50 day, there is a chance the recovery is on. Let’s keep an eye on it here:
(9mo Chart) Head & Shoulders?
(20 day chart) Inverse head & shoulders?
Whichever way we break is the way I will position myself. Here’s a look at my watchlist, which is updated nightly inside the infamous Pelican Room: