Evening Watch List for October 19th

Mish Schneider | October 19, 2015

NASDAQ Takes a Wife

Have you ever played “Farmer in the Dell?” Players form a circle holding hands around one who is designated as the farmer, singing the 1st verse while moving around.

When the verse if over, the farmer chooses a wife. She joins him in the center and the song continues verse after verse, until the cheese stands alone.

In market terms that got me thinking, who is the farmer, the wife and who is the cheese that stands alone in the end?

Let’s make NASDAQ the famer. After all, that is the leading index and only one over the 200 DMA. For a wife, he chooses Semiconductors. Alright, in my Economic Modern Family, Semi’s are a guy. But this is after all, modern times.

So who is the cheese?

SMH is in a holding pattern just under its 200 DMA. If we can get through the October 19th 1987 Black Monday Anniversary date unscathed, it’ll be because SMHtook out 54.15, the 200 DMA, to join QQQs in Holy Matrimony.

The obvious choice for the cheese would be the Russell 2000. However, since nothing in the market is ever too obvious, I’m going with the TLT (iShares 20+ Year Treasuries) as the cheese. Vermont Cheddar. And no, that is not meant as an endorsement for Bernie Sanders!

Why TLTs?

Revisiting the chicken/egg theory where Semiconductors are the chicken and theRussell 2000s are the eggs, the week ended ironically with “X that cannot come without Y and vice versa.

In other words, last Friday, IWM tried hard to drag down SMH. Ultimately, IWMrecovered partly because of the strength in QQQs and partly because SMH didn’t really budge.

Interest rates are really what everybody cares about. Even Donald Trump (no, not meant as an endorsement for him either), spoke about how Janet Yellen is keeping rates low to avoid a recession before the president leaves office.

By that logic, we can assume Janet will raise rates if a Republican wins just to spark a recession. Trump does agree that if rates are raised, “You’re going to see some bad things happen.”

Hence, the TLTs stand alone as our cheese. In order for our Farmer in the Dell(QQQs) to have a happy life with his new wife (SMH), expect to see TLTs also clear its 200 DMA at 124.70.

Heigh-ho, the Derry-O

S&P 500 (SPY) Great action the end of the week. With 203.88 the 65 week moving average overhead resistance, 2 things to watch for. One, a clearance over the 200 DMA at 206 and a weekly close back over that moving average. Subscribers: Positive Pivots in all

Russell 2000 (IWM) Confirmed phase change to recovery-its 65 week moving average is 118.50 FYI

Dow (DIA) 170 pivotal with a move over 172.54 reason to think 175.50 next

Nasdaq (QQQ) Never broke 107 or the 200 DMA and closed on the weekly highs. Also should mention-this is over the 65 week moving average

XLF (Financials) Unconfirmed recovery phase-has to hold Friday’s low

KRE (Regional Banks) Also above its 65 week MA. An open over 41.80 would be interesting

SMH (Semiconductors) Inside day just under the 200 DMA-special

IYT (Transportation) When trannies get confused never a good thing. Think Dow Theory. 144 huge area to hold

IBB (Biotechnology) As long as this keeps closing over 310, I’m cool with Big Bro

XRT (Retail) 46.25 the 50 DMA to clear and hold

IYR (Real Estate) 76 major overhead resistance with 73.20 support

ITB (US Home Construction) If you look at moving averages, the line up in this one shows great potential for a rally

GLD (Gold Trust) Lost some luster with the overall market strength. Holding 112.30 is important

GDX (Gold Miners) 16.00 holding with 17.92 the 200 DMA

USO (US Oil Fund) Good bounce off the 50 DMA-now lets see if this can clear 15.50

XLE (Energy) 70 key to take out

XOP (Oil and Gas Exploration) Over 40.82 looks good

TAN (Guggenheim Solar Energy) Took a rest but that’s fine

TLT (iShares 20+ Year Treasuries) Like this over 124.70

UUP (Dollar Bull) Held 24.60-pivotal number

EWI (Italy) Inside day and it appears in great shape

FXI (China Large Cap Fund) Never mind-pundits saying China slowing but not crashing

DBA (PwrShs DB Ag Fd) Held the 50 DMA

DBC (DB Commodity Index) So did this

SGG (Sugar) Love this

JO (Coffee) Watching to see if holds the 50 DMA

***Market Tone: Short-term Positive 1, Intermediate-Term Neutral, Long-TermNeutral

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.

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"How To Vet the Evening Watch Picks"

Longs:

ACE**
ACN
ADBE
AMZN
BMY**
BYD
CAM
CRM
CTB
CTSH
CTXS
CUBE
CVRR**
DXJ**
EQIX
ESRX**
EW
EXPE
FB
FBR
IACI**
JNPR**
KIM
LMT
MCD**
NOC**
NWL
OAS
P
PM**
QLD**
RCL**
SCO
SINA**
STZ**
SYK**
TSO
UA
ULTA**
VLO
WLL
WNR
YOKU