The Truman Show
The exodus out of the 20+ Year Long Bonds really throughout 2015 but mainly over the last several weeks, has economists, investors and active traders alike wondering whether the Federal Reserve has a master plan or has no master plan and is merely losing control.
Does the Fed plan to raise rates, leave the interest rates status quo, make the market super nervous, and then surprise with a new injection of easing?
As your humble narrator of our Economic Modern Family who drives a minivan seeking to have fun and travel to distant places, I am now considering that like the film, “The Truman Show”, the reality I constructed of the Family in a giant Sheep Pasture actually resembles that film’s constructed reality of a giant artificial, arcological dome.
The Federal Reserve might have begun as the in-charge Producers of The Economic Modern Family Reality Show, but as the relationships among the fledgling economic recovery, low interest rates, rising US dollar and zero inflationhave become harder to read or predict, the Family, like Truman, is beginning to notice certain aspects of what’s supposed to be their near-perfect world changing.
The Russell 2000 or what we anointed as Granddad continues to hold up better than the other indices. However, like Truman, that index is becoming more and more aware of the abnormalities within the other indices as they all are now in confirmed warning phases. In the middle of the trading range, the Russell’sclosed Tuesday marginally in its Bullish Phase.
Retail confirmed the warning phase trading near the lower end of the 2015 trading range. Semiconductors fared better, however unless they crack above the 50 DMA, we can look at the green close as nothing more than a relief rally after the huge decline.
Biotechnology has a better chance of helping ameliorate the Family’s fears as it is above the 50 DMA and not too far from the recent highs. But it has to make its move soon. Transportation, despite the family’s best attempts to reassure that sector, has made no real impact other than temporary respites.
Regional Banks, just as in the film, is speaking directly to the family through a powerful sound system trying to persuade the others to stay. But even with the new highs posted on Tuesday, one has to wonder if there is no more truth in its real world than in the Economic Modern Family’s artificial one.
The Federal Reserve has an unenviable job as Producer. Has the Bull Run all been fiction masquerading as fact?
Come on Fed, help us and the Family still believe in your optimism that the dome is real!
S&P 500 (SPY) If this is to hold has to clear Tuesday’s high and the 100 DMA. If not next stop is 204.70. Subscribers: Negative Pivots in all
Russell 2000 (IWM) 125 resistance, under 124.00 can see 122.65
Dow (DIA) Getting oversold near the lows of the 2015 trading range
Nasdaq (QQQ) Needs a close over the 50 DMA to keep us from seeing the potential double top
XLF (Financials) 24.95 the point to clear with 24.45 the 50 DMA
KRE (Regional Banks) New 2015 highs.
SMH (Semiconductors) 56.00 support and over 56.75 so much better
IYT (Transportation) New low for 2015.
IBB (Biotechnology) Maybe the blast off in Eli Lilly (LLY) at the end of the session will help this remember why I call this group Big Brother
XRT (Retail) Granny’s buckling. Only a move over 100 will save her.
IYR (Real Estate) The rates are killing this sector
GLD (Gold Trust) 3 days up now. A close over 114 will get us interested
USO (US Oil Fund) Cleared 20.00 now has to hold
TAN (Guggenheim Solar Energy) A while ago I wrote that if this trades down to 40.00 it’s a gift. I hope that is true.
TLT (iShares 20+ Year Treasuries) If the Truman Show is real, then this will open over 117.20 and create a possible temporary island bottom
EWG (Germany) Closed just above the 200 DMA
CORN (Corn) Back to basing
DBC (DB Commodity Index) Has to clear 18.00
Longs: On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Note: Anything that is on this list is a candidate for a swing trade-(of course market condition is a factor) -use the max risk mentioned along with an opening range stop using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly
***Market Tone: Short-term Negative 2, Intermediate-Term Negative 2, and Long-Term Positive 3. NOTE: Market Tone is updated before the open each day and reported to you on twitter.
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
MYL 73.12 good risk with a move over pivots and R1 or really 74.18 a good place to clear. Mini to swing
C If holds 55.15 can do ½ and ½ over pivots and R1. Mini to swing depending upon overall market
Category 2: (Pipeline) Positive Phase, Condition 2-3, 2 days under the FTPs, Risk to Previous day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
HLF If holds 51.98 the 10 DMA and clears pivots, 52.54 for ½ then R1 53.10, then could see a continuation move higher. Mini to swing
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy an opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry: (Opening range reversals are good on anything above S1)
NTRS Like on any OR if holds 75.00 and clears 76.00 Miniswing
*SRPT If holds over 27.00 looks poised after the inside day. 25.80 risk and over 27.16 should make new highs
MAS 27.00 good support and has to clear R1 27.43 for a mini to swing. Any OR since pivots slightly positive
M if holds 68.44 and clears all-time high is 70.00 who knows?
Category 4:N/A
Phase Change:
PX Cleared the 50 DMA and has to hold now over 121.10 and then clear R1 122.31 for a swing mainly
Reversal Trades: (Glass or Brick Wall Bottom or Top):
WFM Meets all the criteria and has to confirm over 40.40 and close over there. Risk 39.56
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
BA Under 140.05 breaks recent lows and should be good to the 200 DMA at 137.50 Risk 141.40
LMT Risk to 190.47. Needs to break 188.94 or S1 Day to mini
AXP Inside day. Risk to 79.50 as it broke the 50 DMA. Like mainly for a daytrade and if works well, partial for mini
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
