February 20, 2016
Mish's Daily
By Mish Schneider
Patches, I’m depending on you son, to pull the family through-General Johnson and Ron Dunbar 1970
Who is talking to Patches? Papa. For us Granddad Russell 2000.
Who is Patches? Granddad’s son. For us, the Transportation Sector, IYT. The Protagonist of our story the last two weeks.
Then there’s Mama. For us, Grandma Retail, XRT.
Grandma knows what IYT is going through. Like the song, IYT now carries the weight of the market on his shoulders. Like the song, IYT is working the fields every day, trying to keep the market fed.
Patches is a Gospel song, meant to remind us of the sacrifices the members of our family make for us to help pull us through.
What about the sacrifices certain members of our Modern Family are trying to make for the market? Has IYT done enough? What more must that sector do?
Why am I singing Gospel only six weeks into 2016?
On February 4th, I wrote about the divergence between transportation and the S&P 500 that was beginning to emerge. Then, last week, I explored momentum.
IYT’s downward momentum dried up before the S&P 500’s did. Comparing performance of both instruments, IYT held well above the 2016 lows while SPY went down to test its lows.
IYT went into a Recovery Phase. As of Friday’s close, the only one in the Modern Family and the only general sector besides Utilities (XLU) and Consumer Staples (XLP) to do so.
IYT is also bucking some other trends. The flight to safety measured by the recent buying in the 20+ Year Treasury Bonds (TLTS).
The rise in Gold and Gold Miners. The drop in the US Dollar from the current highs. The continued weakness in Oil (USO), although low gas prices, given trucks and planes require gas, don’t hurt.
However, that double edged sword again of cheap oil-yes, we like it but we fear it as well, considering the implication of a weak global economy (some parts of the US as well) and the fear of deflation.
The Top 5 Stocks in the IYT ETF basket are FedEx (FDX), United Parcel Service (UPS), JB Hunt Transport Services (JBHT), Kansas City Southern (KSU). And Union Pacific Corp (UNP).
If you check out those charts, you can see why IYT is our new dependable son. FDX is the only one not in a Recovery Phase yet. The others are deep into that phase with JBHT close to tackling the 200 DMA or an Accumulation phase!
It will also be smart to watch Granny Retail (XRT). I’d like to see both IYT and XRT work together. Although XRT tried to hold the Recovery Phase, by Friday, it went back into an unconfirmed Bearish Phase.
Encouraging though, is that both ended the week back over their 200 week moving averages.
Can I get a Hallelujah?
S&P 500 (SPY) 195 the big resistance with 188 now best underlying support
Russell 2000 (IWM) 97.75 the 10 DMA. 101-102 resistance
Dow (DIA) Right into some resistance now. But also, holding momentum support. Hard to say what comes next
Nasdaq (QQQ) 103.50 is monthly resistance to note with support now at 98.80
XLF (Financials) Good news is this closed over 20.87 the 200 week moving average.
KRE (Regional Banks) Let’s not forget that KRE is the prodigal son who must get back to prodigal status. It starts with a move back above 35.81 the 6-month Jan Calendar Range Low
SMH (Semiconductors) 50.00 big resistance with 47.50 minor support to hold
IYT (Transportation) 128.40 the 50 DMA has to hold now. Not happy about the negative slope on the 50 DMA.
IBB (Biotechnology) Held the important 255 area and closed green. Needs to do way more
XRT (Retail) Unconfirmed Bear Phase. 41.52 the 50 DMA or the Promised Land
IYR (Real Estate) Haven’t written about this much lately because I am unclear what to say
GLD (Gold Trust) Narrow inside day. 115 now ultimate support
GDX (Gold Miners) Even with the teeny range and inside day, it still traded double the daily average volume. Need a monthly close over 19.00
USO (US Oil Fund) Hung onto the 10 DMA so anything goes as we start this week
UNG (US NatGas Fund) New lows again
TLT (iShares 20+ Year Treasuries) 131 resistance and now, 129.25 support
UUP (Dollar Bull) 25.27 the overhead resistance. Back under 25 trouble
FXI (China Large Cap Fund) Has to hold around 29.55
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