September 30, 2015
Mish's Daily
By Mish Schneider
Granddad IWM-Like Licking Honey off a Thorn
-Louis Adamic
During Wednesday’s strong session, while spying several setups, I must have put my finger on the buy button at least 10 times. I’m not talking about day trading or even 1-3 day miniswing trading.
I’m referring to swing trades-you know, a commitment that banks on follow through to the upside. Then, just as I would initiate the order to buy, I’d take a peek at Granddad Russell 2000s (IWM). That’s the Patriarch of my Modern Family. Like any well-loved, elder statesman, Grandpa is my go-to guy!
And why the fickle finger? Poppy confused me. He held out both hands and asked me to choose which one I thought held the candy and which one held nothing.
As the only one of the four indices to make a new 2015 low on Tuesday, IWM had to show me more than 2 closed fists to convince me that the bear market has run its course.
Tuesday, I wrote about Solar Energy (TAN). Technically, TAN needed to climb above 25.54 and then clear the 26.60 area or last week’s lows. I wanted to see increased volume as a good indication that speculative money was coming back in.
Amazingly, Wednesday’s high was 26.59, just beneath my buy trigger. With scant volume TAN’s activity off of new lows (similar to Granddad) barely impressed.
What would make me want to play IWM’s “find the candy” game?
Here are the 5 criteria of what makes a solid reversal pattern.
No man is an island and certainly Gramps has a family. Granny Retail (XRT) closed out the month under the 2-year moving average for the first time in years.
Prodigal Son Regional Banks (KRE) looks best over both the key weekly and monthly MAs. It needs to trade over the 200 DMA. Semiconductors (SMH) underneath longer term MAs, is sitting just under the 50 DMA.
Transportation (IYT) has way more to prove. And Biotechnology (IBB), that made the whole market way loopier earlier in the week, bounced back over the monthly MA, remains under the weekly MA and on the daily chart, best we can say is it’s working a possible double bottom.
Of course, a good Granddad has candy in both hands. We shall see.
“The first door in the hall leads to youth, the second door leads to middle age, and the third door leads to the bathroom. But knock first, because I think grandpa’s in there.”-Jarod Kintz
S&P 500 (SPY) 190 pivotal and 197.43 above the monthly moving average
Russell 2000 (IWM) Probably over 110-110.54 is even a better sign for this although there is resistance all the way up. I do like that there was an accumulation day in volume. 108.25 support to hold
Dow (DIA) Over 163 clears the fast MA. 160 pivotal. 170 major overhead resistance
Nasdaq (QQQ) Closed over the key monthly MA. Had its death cross finally. Maybe a rally closer to 106-107 for a new and less risky short.
XLF (Financials) Stopped at the fast moving average which needs to clear and 23.20 even more so
KRE (Regional Banks) Major support 40.20-40.50. The 200 DMA at 41.43
SMH (Semiconductors) 47.55 support, 50.16 (50 DMA) resistance and pivotal
IBB (Biotechnology) 3rd day of big volume. Not a clean reversal and not altogether convincing of a bottom yet
XRT (Retail) 44.00 pivotal 45.40 Resistance
IYR (Real Estate) I saw the move in mid-September to test the 50 DMA before it happened. Now, we have to wait for it to clear and confirm to be convinced
ITB (US Home Construction) Inside day near the lows with 25.36 key monthly MA support to hold
GLD (Gold Trust) Granddad’s evil twin
GDX (Gold Miners) I guess miners could be the first to bottom. Watching the 50 DMA
USO (US Oil Fund) Waiting for 15.00
TAN (Guggenheim Solar Energy) Also watching Trina Solar (TSL)
TLT (iShares 20+ Year Treasuries) Looks better over the 200 DMA and has to hold 122.41 the 50 DMA
UUP (Dollar Bull) 25.00 pivotal and over 25.17 clears the 50 DMA
CORN (Corn) Over 24.00 gets real interesting
DBA (PwrShs DB Ag Fd) Waiting for it to clear 21.52
DBC (DB Commodity Index) Like better if can clear/hold over 15.35
SGG (Sugar) First time since June 2014 this closed over the 100 DMA
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