January 5, 2015
Mish's Daily
By Mish Schneider
Samuel Hoffenstein
Welcome to the New Year and the classic cycle of active traders’ portfolios during every market correction:
1. Last gasp new longs for daytrades, out same day with small loss (last week).
2. Weaker longs from right before (up to 3 days) correction, either exit with a smaller profit or lose the percentage allocated for swing losses (we go with around ½% of overall equity). (Last week and Monday January 5th) Also, the portfolio now outperforms the S&P 500.
3. Do not look to buy anything new after experiencing step one and two. (After the daytrade loss)
4. Simultaneously with step one and two, go short (last week)-helps the P&L.
5. After the correction wanes, the picks that have held up in a positive phase or condition, look to buy with tightest risk. Also look for strong reversal patterns. (TBD)
If you are an active trader and not experiencing this portfolio life cycle, probably means:
1. You are a buy and hold long-term investor and not an “active” trader.
2. You are in all cash-not active at all.
3. You are stubborn and don’t know how to position trade or control risk without emotions and ego.
4. You either cannot go short because of account restrictions or maybe because you just don’t like going short.
5. You are as rich as Warren Buffett/Carl Icahn/George Soros and so you are not even watching the screen (therefore you are not reading my daily either)
See below for market commentary and analysis:
S&P 500 (SPY) 204 is the 50 DMA that it broke down from and 200 is the major support-unconfirmed phase change to weak warningRussell 2000 (IWM) The surprising holdout of the 50 DMA hence the bullish phase. 116.68 is the 50 DMA and over 118.78 the point to clear
Dow (DIA) The 50 DMA is 175.84 now resistance and support at 172.30
Nasdaq (QQQ) 100.45 next support and 103 is the 50 DMA to clear
XLF (Financials) unconfirmed phase change to weak warning
KRE (Regional Banks) Dropped EXACTLY to my point 39.15-so what it does from here is really important.
SMH (Semiconductors) A strength in that it is holding the 50 DMA 53.43 and over 54.10 would be relief
IBB (Biotechnology) 300-310 the range to watch for a break either way
IYR (Real Estate) 77.75 pivotal as long as that area holds. But 79 is good resistance
ITB (US Home Construction) 25.05 the 50 DMA and another place to look for longs if market holds
GLD (Gold Trust) Gapped over the 50 DMA but overall, a bit sloppy of a chart
GDX (Gold Miners) Confirmed recovery phase with 20.00 good resistance to clear
USO (US Oil Fund) Even more ridiculously oversold but not registering yet with low ball buyers-unless it gaps up over 19.40 on Tuesday- we will take notice
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs overbought big volume so blow off happening??
UUP (Dollar Bull) Runaway gap confirmed unless it breaks 24.00
FXI (China Large Cap Fund) Over 42.00 on a closing basis game changer
Every day you'll be prepared to trade with:
