September 6, 2016
By Mish Schneider
Do you feel like there’s a pig under the hood of your car that’s guzzling oil yet taking you nowhere?
Imagine that the Modern Family sits together as passengers in our vintage car (at least as old as the bull market). Sister Semiconductors drives. Granddad Russell 2000 is beside her. They both keep feeding the gas tank but the rest of the family planted in the back seat won’t budge. Grandma Retail is locked away in the trunk.
Granddad Russell laments he’s filled the gas tank with cheap oil. As the summer trading season of virtually little to no volatility is now officially over, the market continues to rev up and then sputter out.
Though what’s this we see further up the road in the distance? Another car filled with “Perfect Circles.” Amazon, Google and Facebook (3 out of the 4 FANG stocks) all make new highs.
If we are the market hitchhikers, which car will eventually take us where we want to go? The Modern Family’s vintage car or FANGs hot rod?
Before we go further, a look at oil and the energy markets. The U.S. oil fund has not cleared a key weekly moving average since early 2014. For all you oil watchers as a bellwether to inflation and global markets, until USO clears that level-cheap oil is the reason you hear a knock in your engine.
To all you interest rate watchers as a bellwether to the Federal Reserve’s next policy move-here’s where the Modern Family tells all.
We just determined that most of the sectors in the Modern Family continue to rely on cheap oil. Yet, that cheap oil holds the family back from gaining momentum.
A perfect example is poor Granny Retail. That sector began the post Labor Day season in the red, testing and marginally holding a Bullish Phase.
Transportation, better than Granny, closed unchanged. However, with 140 firm support, at this point we see no real roadblocks to hold it back should it wish to take control.
The Regional Banks gave up a lot of ground today. As most sensitive to where interest rates head next, KRE remains a back seat driver.
Biotechnology continues to prove that speculators, normally out for a joy ride when FANG gets going, are watching from the stands.
Technology, on the other hand, percolates. Can SMH XLK and FANG tow the clunkers? Or will the clunkers lower FANG and Tech’s gas mileage hence slowing them down?
With the Family divided and FANG honking its horn, should we be out there hitchhiking at all? As I said earlier, depends on your destination and how fast you wish to get there.
For now, the roads well-traveled should be ok. For the roads less traveled, be cautious before thumbing a new ride. Ask the driver the last time the oil’s been checked.
S&P 500 (SPY) Has to clear all-time high 219.60 to keep going
Russell 2000 (IWM) Cleared 124.46 recent highs
Dow (DIA) Lagging the others but not too concerning
Nasdaq (QQQ) 118.01 the recent highs to clear
XLF (Financials) 24.30 the 10 DMA support
KRE (Regional Banks) Could have been a sharp reversal. Let’s see if it confirms or not by holding or breaking 42.00
SMH (Semiconductors) Unless this breaks 65.30 see nothing new
IYT (Transportation) 144 next hurdle to clear
XRT (Retail) 43.60 is where the underlying MAs come in. Better if clears 45.
IYR (Real Estate) Back to unconfirmed bullish phase
ITB (US Home Construction) 28.80 the 50 DMA support.
GLD (Gold Trust) Bottomed last week as I thought it might. Now, 127.60 the 50 DMA support to hold
SLV (Silver) 18.62 the 50 DMA to hold above
USO (US Oil Fund) 11.20 the weekly MA to clear-until then noise
XOP (Oil and Gas Exploration) Through 37.91 expect more
UNG (US NatGas Fund) Subscribers: Like it better if retakes 8.16
TAN (Guggenheim Solar Energy) Impressive hold of our original stop
TLT (iShares 20+ Year Treasuries) 138-141 range to break
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