A Market Road Trip with Horsepower and Gas

October 9, 2016

Mish's Daily

By Mish Schneider

How much horsepower does a horse in a horse trailer need?

A horse alone has a peak power output of 14.9 horsepower. A horse in a horse trailer though, doesn’t need any horsepower at all. The horse can enjoy the ride effortlessly. The trailer pulling the horse however, does need to have enough horsepower and enough weight to pull the horse efficiently.

Last week, when the market relied on the horsepower of a single index (QQQ), sector (SMH) or instrument (TWTR), it fatigued quickly. When the market acted like a horse trailer with enough horsepower and weight, it pulled several indices and sectors more efficiently.

However, the market did not travel on an open road. Traffic jams along the way put the brakes on any sustained rally over and over again.

By the time Friday came around, the stop and go traffic caused the market to run out of gas. The horsepower became moot.

A horse alone cannot sustain a rally. A trailer, even with enough horsepower still needs good gas mileage to sustain a rally. How do we get this market to take a fun road trip once and for all?

NASDAQ 100, like a Kentucky Derby contender, continues to run with enough horsepower to keep the finish line of another new multi-year high within reach.

Nevertheless, there is no horse race with only one horse on the track.

Besides the stealth of NASDAQ and the leaders of that pack-Facebook, Amazon and Alphabet Inc., the market needs more horsepower from Semiconductors and the Russell 2000.

It needs to see Retail and Transportation in the running.

Investors have to stop parlaying their bets based on what they think the Federal Reserve might do in December.

The Dow must hold above 18,000 and bust out over 18,400.

To add confidence, Silver, Gold and the Gold miners should stabilize. Oil ought to uphold a price above $47.00 a barrel.

Whether running on their own accord or getting hauled in an trailer, horses love the wind in their mane. So do investors.

S&P 500 (SPY) Same comments as last week: Pivotal point 215 then 212 rock bottom support. Must clear 217 to keep going.

Russell 2000 (IWM) Why we need this. Working a reversal top unless it gets back/closes over 124.75. Went into a weak unconfirmed warning phase. Want to see it back over that 50 DMA pronto

Dow (DIA) 184 to clear and must hold 180

Nasdaq (QQQ) Must close over 119 and hold 117

KRE (Regional Banks) 42.50 support-a bright spot

SMH (Semiconductors) 69.81 point to clear next and 68 to hold

IYT (Transportation) 144 should hold if good

IBB (Biotechnology) Confirmed warning phase. Like to see this hold 280

XRT (Retail) I won’t get that excited until this closes over 44.00.

GLD (Gold Trust) Would have to close over 120.58 to get me interested

SLV (Silver) I like that this held the 200 DMA

USO (US Oil Fund) Possible reversal high if cannot get back over and hold above 11.38

UNG (US NatGas Fund) First close over 9 since January

TAN (Guggenheim Solar Energy) 20.05 would be a good spot to see this hold