Always Something There To Remind Me

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Naked Eyes version written by Burt Bacharach and Hal David

Remember last year? Seems like so 4 days ago! However, in a world of nanosecond exchange of information that gives voice to anyone with a twitter account which in turn engines a mercurial collective consciousness, there are a few footnotes I’ve got written on post-it notes for safekeeping.

1. The Year of the Horse-imagery in my mind in reference to the Chinese New Year symbol for 2014, the Horse. We saw a market that galloped then bucked, with particular focus on the Horse of a Different Color, the Contrarian Horse or-Conventional Wisdom? Not so much. (Note-the New Year in China is not until February 19th.) The horse prevails until the more peaceful sheep takes over.

2. 200 is the new 100 then 300 is the new 200-or in another words-volatility, which if one looks at the daily S&P 500 VIX short term chart, one will see that after a brief visit over the 200 DMA during the drop in October, followed by an even briefer visit over the 200 DMA in mid-December, we are now testing that point again. If 3 times is a charm (or more aptly put, a jinx), then the next move above the 200 DMA could spell trouble for the market in the short term at least.

3. The Greenback-(and our probable European vacation this year)-those of you who sit around and wait for economists to predict the future, consider the technical world of moving averages, chart patterns and phase changes. A textbook example of everything. (Dr. Hawking-are you still looking for the Theory of Everything?) In 2014, the dollar had an island bottom, converging moving averages, and phase changes from bearish to bullish. Also I continue to consider the implications of a strong dollar other than the better hotel rates and cheaper shopping in Paris, i.e. the cost of goods of business overseas versus in the US, and the benefit for China.

4. My “tells” still telling-The small caps or Russell 2000s-not over but certainly not presenting confidence until it decidedly takes out the 2014 highs. Oil-cheaper better but precarious (wish I could stockpile gas at $1.76 per gallon in Santa Fe) leaving fate to the whims of OPEC this year. Interest Rates-BIG TELL since so much of the profit margins in 2014 came from low-hanging fruit-costs that were easy to cut where associated negative impacts do not show up short-term. Low rates, low cost to borrow. Corporate borrowing costs, if increase this year, can reduce corporate profits by anywhere from 11-22% according to Baijnath Ramraika, CFA in an article published by SeekingAlpha on December 11th. That TELLS me that one must choose carefully which sectors and groups to trade in this year should rates move up. OMG-that sounds awfully fundamental, but nothing beats a great trade like when both the fundamentals and technicals support one another.

5. My final post-it is a drawing of a stick figure sitting on a horse that’s hauling gasoline, has pockets lined with dollars, a bit made of small caps, that’s heading toward the Federal Reserve building prepared to joust or retreat.

At least until the sheep are in the meadow….

S&P 500 (SPY) Touched down on the 50 DMA and held. 203.90 is the support or could be looking at 200 next. A relief would be a run over 207. Subscribers: Negative pivots in all

Russell 2000 (IWM) Held 117.60-118.00 after failing to keep new highs but, anything can happen from here-better over 120

Dow (DIA) 178.65 point to clear or could see 175.35 level

Nasdaq (QQQ) Either this clears the 10 DMA at 104.10 or breaks the 50 DMA which takes the price to 100.00

XLF (Financials) With now 3 days closing over floor trader pivot points, this has to either recapture 24.90 or trouble since we need this group to hold

KRE (Regional Banks) Tested and held the 50 DMA-like support around 39.10 and back over 40.60 better

SMH (Semiconductors) 53.32 is the 50 DMA and 55.10 the point to clear

IYT (Transportation) Back on November 28th this had a reversal candle confirmed from the highs. Unless we make new highs or clear 165.10 and close above, could see 160.75 or lower

IBB (Biotechnology) Interesting inside day with 310 the area to clear

XRT (Retail) New highs last Wednesday then reversal on Friday. Watching this carefully.

IYR (Real Estate) 77.75 pivotal, inside day yet still has a looming reversal candle from December 23rd

ITB (US Home Construction) Still have hopes here over 26.00

GLD (Gold Trust) All moving averages declining in slope except for Friday’s price action which was green. Time will tell

GDX (Gold Miners) Big mover on Friday, taking and closing above the 50 DMA

USO (US Oil Fund) Ridiculously oversold but not registering yet with low ball buyers

OIH (Oil Services) If this takes out 36.50 could be interesting for more bounce

TAN (Guggenheim Solar Energy) Subscribers: That 50 DMA is what I am waiting for

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Over 128, hard to believe, but that is a new high if happens

UUP (Dollar Bull) Runaway gap if confirms

FXI (China Large Cap Fund) Over 42.00 on a closing basis game changer