The Fed Puts Its Heads Together
Behold The Federal Open Market Committee and the Board of Governors of the Federal Reserve System.
Where’s Janet in this collection of men you might ask? We could say she’s the metaphorical sculptor. After all, she assembled her hawks and doves earlier to determine that they “will likely raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment.”
A Big “If”
Last night we had dinner with some friends. They wondered if the FED would potentially raise the interest rates during an election year. It seems to me that if Yellen has proved anything since taking over as Chairman, it’s that she has one mission: to reverse the impact of 7 years of bond buying by the Fed. Yellen has tightened marginally with the increase in Fed Funds by ¼ percent back in December. Now, the FED intimates at yet another raise in June.
However, the FED has shown restraint in actually raising since they did so in December. This to me means that, gulp, we must try to predict the market’s next moves using other parameters. I for one, welcome the chance to evaluate the market on different terms other than if the FED raises, lowers or does nothing.
Looking at our Prodigal Son, the Regional Banks (KRE), they made a spectacular move higher crossing back over the 200 DMA for an unconfirmed return to an Accumulation Phase.
Since April, when it finally crossed back over the 50 DMA, KRE has changed phases 6 times. Constant and erratic phase changes signify not only a confused market, but one that wishes desperately to reconcile one consistent sentiment. Buy, sell or get out of the way.
If Banks are Going Higher, Is it Safe to Buy?
Well there’s that big “if” again. We need more than KRE and the banks to sustain a rally. We need Retail for one. XRT held 40.00. However, Granny must loosen her wallet and believe the Fed’s faith in a possible roseate economic future. Today Retail closed weak.
Then there’s Granddad Russell 2000 (IWM). Back in a Bearish Phase, if it holds over 107 and can retake 111, Granny should follow in kind. If 107 fails, I would expect more pressure all around.
With Transportation the wild card, no surprise it had an inside day (traded within the trading range of the day prior). My eyes remain there as the best barometer for which way the market moves next.
With the recent run into commodities, major liquidation occurred in the metals, miners and oil. Classically, higher rates mean a stronger US Dollar which makes it more expensive to buy commodities.
At least that’s in an orderly world. My overriding sense has been that Janet sees a precarious threat looms over the natural order of things.
S&P 500 (SPY) Confirmed warning phase. 206 area to clear. 202.44 next support. 210 hurdle. Subscribers: Negative pivots in all
Russell 2000 (IWM) Confirmed Bearish Phase. 107 underlying support with 111.15 the 200 DMA
Dow (DIA) Confirmed warning phase. 174 some support then 172. 178 resistance
Nasdaq (QQQ) If the May 6th low is good, this should hold above 104.40
Volatility Index (VIX) Doing nothing
XLF (Financials) 22.80 the 50 DMA held to the tick then this closed above the 200
DMA for an unconfirmed phase change to accumulation. 23.05 pivotal
KRE (Regional Banks) There is a gorgeous trendline under today’s low of 38.63. Unconfirmed phase change to accumulation. 40.20 pivotal
SMH (Semiconductors) Unconfirmed Warning Phase. Like better over 53.75 on a closing basis
IYT (Transportation) 134.27 important support. If that holds and this clear 140.60 get bullish. Inside day.
IBB (Biotechnology) A weekly close under 249 would not be good
XRT (Retail) 40.00 some support. 41.60 resistance
IYR (Real Estate) Unconfirmed warning phase
GLD (Gold Trust) 119.50 the 50 DMA.
SLV (Silver) 15.90 area has been support. If clear 16.50 then it’s going higher
GDX (Gold Miners) I’d be amazed if this rally is done with the perfect test of the 200 weekly MA then retreat. We shall see
USO (US Oil Fund) 11.92 the 200 DMA could not hold. I think the longs got too crowded.
XOP (Oil and Gas Exploration) A weekly close over 34.57 is a good sign for this
TAN (Guggenheim Solar Energy) I am patiently waiting for a new buy opp down here
TLT (iShares 20+ Year Treasuries) TBTs don’t really get interesting until they clear 39.00. However, 35.00 is now really good support to trade off of
UUP (Dollar Bull) 24.55 pivotal
IFN (India Fund) Subscribers: Confirmed the accumulation phase but closed near the intraday lows so keep watching before acting
RSX (Russia) Subscribers: 15.75 the 50 DMA
CORN (Corn) Subscribers: Like to see it test and clear 22.50
BAL (Cotton) Subscribers: Still good time to get into this if you want another commodity play
DBA (PwrShs DB Ag Fd) Subscribers: Broke out of the weekly channel which should be good
DBC (DB Commodity Index) Subscribers: 14.50 support
SGG (Sugar) Subscribers: Over 38.75 should see a new leg higher
JO (Coffee) Subscribers: 19.30 is probably a buy opportunity
***Market Tone: Short-term Negative 2 Intermediate-Term Positive 1 Long-Term Positive 6
NOTE: *All starred picks are from the automated list of picks (which now includes short picks!) denote that it has one or more of the 18 chart patterns we have used on the radar screen. For example, inside day, 2 days under floor trader pivots, phase change, brick wall or return to the 10 DMA, etc.
Longs
AEM**
AGQ**
AIV**
APA
APO
CB**
CDE**
CME**
CNO**
CNX
COG**
COST**
CRM**
DFS
EW
FB**
FBHS
GDX**
GDXJ**
GLD**
GLPI**
HUN
IPG**
IR**
KKD
LNC**
LRCX
MET**
MFC**
MPW**
MS**
MUR
NEM**
NSM**
NTRS**
OC
PBR
PBR.A
PNR
PRU**
QCOM**
RRC
SLW**
SNE
TCK
UNM**
USG**
Shorts
BBBY
CTB
DISH
GILD
GME
JNPR
JWN
M
MAR
MOS
NKE
SYNA
TIF
TPX
UAL
VRTX
WSM
