A Comfortable but Confined Market

April 30, 2017

Mish's Daily

By Mish Schneider


blankLast week, the market began elevated by a forklift.

Monday’s Daily stated, “In the market, Technology and the FANG stocks did all the heavy lifting.”

Tuesday, the market looked like a Roadrunner, born to run. The Daily stated, “At 7 years old, the bull market might have only one more run that outpaces humans.”

Wednesday, we wondered how much hot air the market had left. The Daily made a bold prediction.

“The Russell 2000 takes out the top of the channel on the monthly chart at 141.50 area. Maybe it flies as high as 143 level. But then, should the price of IWM return below 140 either at the end of April or sometime in May, I’d make sure the passengers (traders) have on their flame-retardant clothing.”

Thursday, like the “Miracle Stair” in the Loretto Chapel, the market appeared to have “two 360 degree turns and no visible means of support.”

By Friday, traffic grid-lock during rush hour occurred after Amazon and Google soared on their earnings reports.

However, also on Friday, Wednesday’s prediction came to fruition. The Russell 2000 ended the month below 140. Earlier in the week, it pierced above the monthly channel resistance then closed beneath it.

The administration completes its first 100 days. The fire rooster continues to flamboyantly cock-a-doodle-doo.

Yet, considering how several Modern Family sectors stressed out, should a comfortable rooster crow behind bars?

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The IWM monthly chart shows the channel top and bottom in cyan. Last Wednesday, IWM poked its head above the channel line when it made a high of 141.82.

In February, the high tick was 140.32. In March, it was 140.86. Giving it some leeway, a closing price for April under 140 offers a head’s up.

Furthermore, Retail closed weak as it failed to take out the 50-week moving average, 200-day moving average and 23-month moving average.

Transportation and Regional Banks both closed in warning phases.

Semiconductors, the Modern Family leader, could not hold above a key inflection point, 80.00.

Biotechnology held its gains. Perhaps a bright spot in the Family if that trend continues.

We have certainly seen the market ignore the Family’s warnings plenty of times this year. I suspect though, that hope trumped fear during the administration’s first 100 days.

Now, the market could shift its perception to a rooster with plenty of toys and enough to eat but confined in a gilded cage.

S&P 500 (SPY) 239-240 resistance 236.25 key support

Russell 2000 (IWM) Failed 140 at the end of the month. Caution unless it opens strong on Monday and stays that way

Dow (DIA) Resistance at 210-212. 207 support

Nasdaq (QQQ) Crowded at the top but not overbought

KRE (Regional Banks) confirmed warning phase but landed on support at 53.95

SMH (Semiconductors) 80.00 super pivotal

IYT (Transportation) Caution for now

IBB (Biotechnology) Needs to hold 292.25 and clear 300

XRT (Retail) 43.83 the 200 DMA and 42.40 key support

IYR (Real Estate) 79.00 pivotal

GLD (Gold Trust) Support 118.75-120 area. Time for this to move beyond 121

SLV (Silver) Oversold-looking at a 16.00 risk if clears back over 16.50

USO (US Oil Fund) Needs to get back over 10.45-10.50

TAN (Solar Energy) A close over 17.60 with volume will be interesting

TLT (iShares 20+ Year Treasuries) 121.38 support and 123 resistance

UUP (Dollar Bull) 25.50 area support on multiple timeframes holding

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