Even though stocks continued lower on Wednesday, there seemed to be less selling pressure as the market internals were not as negative as they had been earlier in the week. European markets are showing nice gains early Thursday, and if the gains hold into close of trading, it could be an early sign of a stronger rally.
The US markets are nervously awaiting the jobs report on Friday and a better-than-expected number could cause some short covering. On the other hand, a weaker-than-expected number will increase the growing skepticism over the US economic recovery. As noted on Tuesday, the weekly and daily charts show that prices are already approaching more important support.
There were some extreme oversold readings from the short-term indicators Monday as the Arms Index (TRIN) closed at 3.25, which was the highest reading since June 2012. The declining 20-day EMAs now represent first strong resistance. For the Spyder Trust (SPY), the 20-day EMA is at $179.45, at $86.26 for the PowerShares QQQ Trust (QQQ) and at $112.63 for the iShares Russell 2000 (IWM).
Even though we have recently seen some short-term weakness in US economic data, much of the data out of the Eurozone continues to indicate a recovering economy. Therefore, the current correction should present a good buying opportunity in the Eurozone and these are the three ETFs I like the best right now.
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