April 24, 2016
Mish's Daily
By Mish Schneider
A Family That Stayed Together Saved the Week.
For many families, this past weekend embarked the celebration of Passover. A time for joyous festival, it represents the Israelites liberation from slavery. Using symbolism such as bitter herbs, matzo (unleavened bread) and wine, families retell the journey to freedom by asking and answering four questions.
All four questions ask why celebrate freedom at this particular time. They also ask why, in order to celebrate freedom, specific customs are repeated each year.
Last week, another family got together to ask what they must do to liberate the market from the selling pressure of bad earnings and speculation of rising interest rates.
The Modern Family came together in a way they have not been able to do for most of 2016. Of course, as a relatively exclusive family, their current union presents us with our own four questions.
I have assembled six charts of the Family Members in order to help us ascertain the answers to those questions.
All of the above charts are weekly prices, not daily. Each bar represents one week. The dark blue line is the 50 week moving average. The green line is the 200 week moving average.
On the Russell 2000 or IWM chart, there is a black trend line coming down from the 2015 highs. You can see that the price for last week closed above that trend line confirming it as a legitimate breakout.
However, one stat doth not full analysis make. I like the weekly charts for a longer term perspective. If we begin with Granddad IWM, he stopped at a critical juncture. Although the price is above the trend line, the rally ended last week right under the 50 week moving average.
A similar chart pattern exists with Granny Retail (XRT). The price action stopped just below the 50 WMA. Amazingly, we can say exactly the same thing about our Prodigal Son (KRE), who received such a warm welcome back to the clan last week.
Transportation (IYT) and Sister Semiconductors (SMH), both have cleared their 50 week moving averages.
Interestingly, although Sister Semis is above the 50 WMA, she is the only family member to close down for the week. Even our elder and big brother Biotechnology (IBB) gained in price. Biotech remains the weak link as it is currently not even close to the 50 week moving average.
To answer our 4 questions, was this rally different, will it last, what does it mean for the rest of the market and where might the Family go from here, we can surmise this:
Yes, the Israelites were freed from bondage, but it was hardly the end of their problems. Same is true with what last week’s Modern Family action means for the market. With more big earnings reports due out and an upcoming FED meeting, the above charts illustrate inflection points that must be crossed. And crossed soon!
This rally is indeed different in that all of the members are in synch. That’s the first time that has happened in quite some time. Will it last? The charts tell us YES, it can last IF KRE, IWM and XRT can clear those 50 week moving averages. If they clear those moving averages, that will surely help the rest of the market.
At the end of the Passover dinner, the Prophet Elijah (considered a protector) is invited in for a cup of wine that is poured but not drunk. Note how the Dow ended last week nearly exactly at 18,000-our terror number. Is the Dow Elijah?
If Passover is a time to remember history, the Modern Family weekly charts are the representation of time to remember the history of price. Liberation for the bulls is only a clearing-of-the-moving-averages away. However, if that Red Sea fails to part, here come the bears.
S&P 500 (SPY) 206.84 point to hold. December high 211. Friday’s low was also the 10 DMA so good support
Russell 2000 (IWM) 112.25 the 200 DMA to hold. The 50 week moving average to clear is 114.40
Dow (DIA) Closed right at 18,000. Super pivotal coming into this week. Also held the 10 DMA making Fri low good support to hold
Nasdaq (QQQ) 107.85 the 200 DMA held. Back to work.
XLF (Financials) Inside day. 23.25 the 200 DMA and now support. Closed just over the 50 week moving average-good sign
KRE (Regional Banks) Back over the 200 DMA for an unconfirmed accumulation phase looking for a second close
SMH (Semiconductors) 54.00 a good point to hold especially on a closing basis.
IYT (Transportation) Did what it needed to do. Now, needs to clear 148 hold 144.
IBB (Biotechnology) Good close. Friday’s low good point to hold for this to continue higher
XRT (Retail) Held the 200 DMA. Good thing. 45.60 the weekly MA to clear
IYR (Real Estate) Inside day at this point means digestion after 2 big down days.
ITB (US Home Construction) Marginally confirmed a reversal. Could be more of a new sideways consolidation
GLD (Gold Trust) All the bearish calls came out after the unconfirmed warning phase. If they are right, won’t close over 118.35
SLV (Silver) 15.50 now point to hold
GDX (Gold Miners) 25-26 should be next target if holds 21.00
USO (US Oil Fund) 10.80 needs to clear on a closing basis.
XOP (Oil and Gas Exploration) 33.00-33.50 support
UNG (US NatGas Fund) Another commodity waking up
TAN (Guggenheim Solar Energy) Over 25.20 looks great. 22 the major underlying support
TLT (iShares 20+ Year Treasuries) 127 next point to hold. Last week I tweeted that TBTs looked good with the caveat of a FED meeting.
UUP (Dollar Bull) Gapped above the 24.50 pivotal point and closed well. 24.87 the overhead resistance
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