January 21, 2017
By Mish Schneider
“Hey barkeep. How ‘bout pouring me two thumbs of formula to wash down these nuts?”
Welcome to the official start of the term of our 45th President. The Daily Mirror’s sub headline on Friday read…” now the world holds its breath.”
For our purposes, we focus on the market. We focus on the Modern Family. We focus on the impact of commodities prices, interest rates, global economic issues, foreign geo-political events and changes in domestic policies.
We keep in mind the 2017 mantra, “Uncertainty is the new sure thing.”
We watch the January 6-month calendar ranges unfold. We get passed earnings season. We tune out the noise, shake out the cobwebs and keep moving forward.
Like a baby, we drink our manufactured formula to make the nuts go down easier.
Last week, we examined the heart of the split personality market.
Semiconductors has the distinction of the only Modern Family sector that tested recent all-time highs and closed above the January 6-month calendar range high.
In stark contrast, the Retail and Biotechnology sectors both ended the week poorly. Retail particularly, closed beneath its 6-month calendar range low.
(As an aside, Melania wore Ralph Lauren (as did Hillary Clinton.) Concerning retail, high-end luxury designers could get a boost. Call it the First Lady and First Lady President candidate bump.)
To date, the market shows no classic signs of fear. Yet, nearly everyone has stopped talking about 20,000 in the Dow. That was so 2016.
Furthermore, commodities prices continue to rally. Gold, silver, softs such as coffee, and agriculturals like corn and wheat moved higher. Interest rates and the dollar softened.
All the above-mentioned relationships continue to suggest trouble ahead. Stagflation? Perhaps. I keep coming back to that as a viable scenario. Should the economy sputter and inflation take hold, great intentions of change will nonetheless pave that proverbial road.
Perhaps I am getting ahead of myself. However, I am troubled by the disparities among the family (IWM, XRT, IBB, IYT, SMH, KRE) and have been for a while.
Nevertheless, every economic cycle presents opportunity if well-prepared. Moreover, no reason to count our chickens before they hatch (a theme this week ahead of the Chinese New Year!)
For now, while we wish for a smooth transition, we will also watch the phases and calendar ranges for technical signs.
We shall know soon enough if the new administration’s formula is enough to sate our thirsty babies.
S&P 500 (SPY) 226.00 pivotal support, then 224.50 and above 228.34 the high.
Russell 2000 (IWM) 135.50-136 Resistance. 133.59 pivotal support.
Dow (DIA) 197.40 pivotal support. Through 198.50 better
Nasdaq (QQQ) 122.50 support to hold
KRE (Regional Banks) 53.72 to defend. 55.10 point to clear
SMH (Semiconductors) 72.60 pivotal area. 74.00 resistance to close above.
IYT (Transportation) 166 pivotal area and over 167 better
IBB (Biotechnology) Unconfirmed bearish phase Tuesday, unconfirmed accumulation phase Wednesday, unconfirmed Bearish phase Thursday-unconfirmed distribution phase Friday
XRT (Retail) 43.90 pivotal resistance
IYR (Real Estate) If this breaks a trendline around 75.75 that would not be good and over 78 much better
GLD (Gold Trust) Must clear 116 to keep going
SLV (Silver) 16.00 pivotal support 16.50 resistance
GDX (Gold Miners) 23.00 pivotal area.
USO (US Oil Fund) 12.00 is big resistance and 10.80 big support
TAN (Solar Energy) 18.00 key
TLT (iShares 20+ Year Treasuries) 120.25-119.50 is the support this rally took off from. If holds has legs, if not, expect to see TBTs hold over 40.00
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