February 1, 2016
Mish's Daily
By Mish Schneider
Silver White Winters That Melt Into Spring
When the dog bites, when the bee stings
When I'm feeling sad
I simply remember my favorite things…
First, thanks to my assistant Jonathan Griffin, for writing the daily in my absence.
Secondly, the overall market, although still in its bear phase with the exception of NASDAQ in a Distribution Phase, has held on to the January 6-month Calendar Range low since I left.
This week begins with low volume follow through in the indices after Friday’s big rally.
A far distance from the January 6-month Calendar Range high made early last month, one has to wonder if the respite in the negative phases will peter out long before the indices get to test the beginning of the year’s highs?
Turning to my Modern Family the Russell 2000s, which before I left had mentioned if it held 97.51 could see 110, has had below the average daily volume on this rally ever since it began January 26th.
110 remains plausible, although hard to imagine why the confidence in the economy or in the Fed’s willingness to keep the tap on would bring in that much substantial buying.
If anything the FED has clearly stated that inflation is their main focus on future interest rate policy.
So, do we believe this rally? Is it too late to buy? Or are we better off waiting for renewed selling and short trades in the direction of the overall phases?
Back in 2009, I became bullish (or at the very least no longer negative) in the spring when the S&P 500 turned on a dime and by early summer, took back the 65-week moving average. The action of the FED was early stages of Quantitative Easing.
Fast forward, we seem to have the opposite scenario. SPY is under a negatively sloping 65-week moving average and the FED has clearly stated their intention to raise rates rather than ease. The current rally only makes their case to raise stronger.
My favorite clues besides IWM, lie with the rest of the family. Currently, those clues are mixed. Retail cleared back over the 200-week MA. Regional Banks did so to begin the week, but will they close there by Friday-CLUE.
Biotechnology is well under the 65-week and could be forming another smaller bear flag. The 200-week moving average is well below current prices.
Semiconductors look better than the rest yet are still very far away from January highs at 52.86. That kind of supports my point about a fundamental shift needs to accompany technical and low volume bottom fishing type buying.
If Regional Banks are our best clue to hold over 36.40 by the end of the week (200-week MA), then Transportation is our other best clue.
127.82 is IYT’s overhead 200-week MA. When the Modern Family trades in harmony, I for one feel a lot safer bucking a trend. IYT has to get there, hold it and then keep going up from there. A test and failure of the 200-week MA, expect renewed selling in the other family members as well.
In the meantime, I continue to stay in certain commodities and have close eyes on shorting the dollar. Oil could be bottoming, but it sure isn’t wowing me.
S&P 500 (SPY) Into resistance around the 195 level. Needs to hold Fridays low. Subscribers: Positive pivots in all.
Russell 2000 (IWM) Although tested it, 103 is the next big hurdle to clear here if can hold 100.30 the 10 DMA.
Dow (DIA) Although tested it needs to see a move over 164.69 and to hold 160.58
Nasdaq (QQQ) GOOGL could boost this however, it still has tremendous issues comparatively and needs to hold 102.30
XLF (Financials)Now over the JCRL but into resistance at 21.73 area
KRE (Regional Banks) Inside day. 35.81 the JCRL to defend
SMH (Semiconductors) Needs to clear/hold the 50.00 level to continue.
IYT (Transportation) 125.81 recent highs to clear with 121 support to hold
IBB (Biotechnology) Unless this clears back over 276.17, another bear flag forming
XRT (Retail) Had a weekly close back over the 65 weekly moving average at 40.59. We can call that pivotal
IYR (Real Estate) Has to close over 72.09 otherwise kind of sloppy
ITB (US Home Construction) Want to see this back over 25 before I’ll get excited.
GLD (Gold Trust) Approaching the 200 DMA
GDX (Gold Miners) 15.00 is the spot to clear which will take over months of work
USO (US Oil Fund) 9.00 key and then 8.64
UNG (US NatGas Fund) 7.63 area must hold
TAN (Guggenheim Solar Energy) Still seems to be stalled here. Needs to clear 25.25 on a closing basis.
TLT (iShares 20+ Year Treasuries) 126-127.92 the range to break one way or another
UUP (Dollar Bull) Waiting for a confirmed phase change to negative
EEM (Emerging Markets) Held Friday’s move with 30 pivotal
FXI (China Large Cap Fund) 30.00 key support
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