July 7, 2016
By Mish Schneider
Photo: JR Lancaster
Last night we went paragliding. And we almost got the Dow to launch to 18,000! However, just as the Dow got within 20 points away from altitude, it did what it has done with every attempt to get there-failed.
At least eight tries this year alone. That has me wondering, is the recurring ascent like the photo above, a climb up the ladder to nowhere?
Oh sure, the Dow likes the view from up there. But getting to the mountaintop? Turns out it’s frustratingly out of reach.
That leaves me with questions.
With the Russell 2000 testing and holding the 50 DMA today, one way we can answer with an affirmative to the 2nd and 3rd questions is if IWM takes out the pre-Brexit high or 116.
That should in turn help Semiconductors not only get through its pre-Brexit high but also allow it to fill a gap up to 57.66. That would be constructive.
With Retail confirming a Recovery phase by closing for a second day in a row over the 50 DMA, XRT along with the aforementioned family members, should take the Dow over the hump.
Seems if Biotechnology has any say in the matter of affirming or denying Dow its due over 18k, today’s session was clutch. IBB continued the move higher and confirmed a Recovery Phase.
What then could make 18,000 look more like an obvious top?
Transportation for one. There is some room for error, but if IYT fails this week’s low made on Wednesday, that would be quite literally, a real downer.
The Financial ETFs, Regional Banks (KRE) and XLF both hold a lot of hot air. If either decides to release that air through a refreshing exhale, then it starts with KRE clearing and holding above 137.65 by the end of the week. XLF looks a bit better on the weekly charts than KRE does.
If, on the other hand, either XLF or KRE decide to blow off their hot air through other channels (if you get my drift), then like IYT, it means failing this week’s lows.
External factors have a part in the Dow’s next direction as well. Undoubtedly, oil gives the market a deflationary scare. Grain prices fell hard after making substantial gains earlier.
Metals are not necessarily a comfort to anyone in the family right now. Trading on their own fumes, most analysts interpret this year’s strength in miners, gold and silver as a danger sign.
Furthermore, the Fed’s policy of keeping rates near zero seems more like an anchor than a lift. After all, the current policy reflects a lack of confidence. And then of course, there’s Europe.
Alas, at the end of the day does any of this even matter? After all, typical historical relationships have become as precarious as a ladder to nowhere.
S&P 500 (SPY) 207.70 is still the pivotal 50 DMA to hold. 210.87 the pre-Brexit high
Russell 2000 (IWM) 116 important level to clear on several time frames. 113.35 the 50 DMA support to hold
Dow (DIA) 179.83 the pre-Brexit high. 176.80 support then 175
Nasdaq (QQQ) Confirmed accumulation phase. 107.40 support Now, it must clear pre-Brexit high of 108.79 on a closing basis
XLF (Financials) Needs to get back over 23.00 and hold 22.16
KRE (Regional Banks) Let’s see if it can get back over 37.65
SMH (Semiconductors) 55.00 key support with 57.46 resistance
IYT (Transportation) 132.90 key support on a weekly basis. Through 136.06 better
IBB (Biotechnology) Confirmed recovery phase. 265 support and 272 the big overhead resistance
XRT (Retail) 42.27 the 50 DMA held to confirm the recovery phase. I’m not bullish any of the Modern Family sectors long term, but they all have rally potential
IYR (Real Estate) 81.00-81.15 key support
ITB (US Home Construction) Held 28 on a weak day. A good sign
GLD (Gold Trust) A correction does not change my bias. See no real resistance until 132. Support 125.90
SLV (Silver) 19.35 the 200 Week Moving Average. Worked off some of that overbought condition which is good
GDX (Gold Miners) 31.35 the last swing high in August 2013. 28.44 support
USO (US Oil Fund) Tried to get through 11.60 and instead turned back down hard. That is why the weekly moving average is what I am watching and not the daily noise
OIH (Oil Services) 27.95 the weekly moving average to hold
UNG (US NatGas Fund) Not so nice when an instrument retraces to the major support, hangs out and then rallies from there one day then fails the next. However, until it crosses the 50 week moving average all noise.
TAN (Guggenheim Solar Energy) Just not enough volume
TLT (iShares 20+ Year Treasuries) Perhaps we will have a better sense after the jobs report. I still watch for a top. But the key is watch not trade until it happens.
UUP (Dollar Bull) 25.05 the 200 DMA resistance. 24.70 support
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