January 9, 2016
Mish's Daily
By Mish Schneider
After last week’s market demise, I decided to take a quick inventory of the 6 phases and which instruments remain in positive ones versus the plethora of ones in bearish phases.
Furthermore, I did another quick inventory of those instruments in protracted bear phases that might be showing signs of bottoming.
Granted, it’s a short list, so let’s spin that to mean, less is more!
Not to depress you, some of the positive phases I see are in ultrashorts that are now in Recovery or Accumulation Phases. That’s information however.
In the Macro picture, and given that my Modern Family are all in either Distribution or Bearish phases, those ultrashorts could be handy to watch if you prefer to “buy” your way short.
Last week I wrote about the 200 week moving average. Not only is this moving average watched by many institutional firms, it represents the end or beginning of a 4-year business cycle.
Considering the market went from a bear market in 2008 into a 4-year bull cycle which lasted until the end of 2015, the two 4-year business cycles back to back (from bear to bull back to bear), coupled with the 200 week moving averages are extremely valuable to study.
To review the most significant 200 week moving averages, we need to look no further than in the Russell 2000 (Granddad) and Transportation (Transgender sib).
IWM literally landed right on the 200-week MA at 105. If you regard this as an area rather than an absolute number, IWM has to hold here and work its way back up to 110 this coming week to survive. Otherwise, I would expect IWM to work its way down to 90.-91.00 level over time.
IYT closed out the week under the 200-week MA. Unless it clears back over and holds above 127.25 this week, 109 is in its purview.
Positive Phases
If you're not familiar with how we define the phases check out this quick tutorial.
Besides the index ultrashorts, GLD and gold miners (GDX) are in Recovery Phases although they stand alone in the metals sector as such.
The 20 + Year Treasury Bonds (TLT) are in Accumulation along with the Japanese Yen (FXY) and sadly the Volatility Index (VIX). The Euro (FXE) is in an unconfirmed Recovery Phase (needs a second close above the 50 DMA).
Natural Gas (UNG) is the only energy sector now in Recovery. In market sectors, only Utilities (XLU) is in a Recovery Phase, also unconfirmed.
In equities, the ones I follow, First Solar (FSLR), Digital Realty (DLR) Kroger (KR) and Panera (PNRA) are in Bullish Phases.
In Accumulation and Recovery Phases are two of my favorite potential megatrend stocks Solar City (SCTY) and Sohu (SOHU). There are others in the solar space mainly. 3D printing is struggling to find a bottom after a protracted bear move. The phases are all still Bearish.
As for watching the end of protracted bear markets in hopes of catching them as they go into Recovery, I continue to see commodities, especially agriculturals, as the best bet.
After sitting in “deflationary” mode for quite a while, at some point, those phases will turn. Just look at the UUP or US dollar chart. It declined from 2008 until its nadir in May 2014. Currently, UUP is close to those 2008 highs.
“Never give up, for that is just the place and time that the tide will turn.” Harriet Beecher Stowe
S&P 500 (SPY) So ugly until you remember that August low was 182.95.
Russell 2000 (IWM) Hoping that it recaptures 105 after ending the week oversold with blow off type volume
Dow (DIA) 157.50 the 200 week moving average
Nasdaq (QQQ) Big volume with support at 104 and a good place to bounce from if Monday holds up
Volatility Index (VIX) The 200 week moving average is so far away that it seems unlikely we will get there for a very long time if ever
XLF (Financials) 22.00 is the low to hold. Had big volume so maybe getting saturated to downside.
KRE (Regional Banks) Oversold. Very. Not as much on the weekly chart though so could see 36.50 the 200-week MA next
SMH (Semiconductors) Oversold on all timeframes. 48.00 support and 52 overhead resistance
IYT (Transportation) Needs to get back over 127.25 next week or next leg down inevitable
IBB (Biotechnology) Broke the 23 monthly MA with a lot of the month left. 307.25 nearby resistance
XRT (Retail) 40.45 the 200-week moving average
IYR (Real Estate) Nothing is too big to fail. 70 major weekly support
ITB (US Home Construction) 23.30 the 200-week Moving average
GLD (Gold Trust) The 100 DMA is at 106.44 with major support 104
SLV (Silver) Not doing what the GLD is unless it can clear 13.65
GDX (Gold Miners) Needs to clear 15.00
USO (US Oil Fund) Extinct for real
UNG (US NatGas Fund) Study the 2-day reversal pattern in December off of the new lows-what we need in some of the other beat up commodities
TAN (Guggenheim Solar Energy) Subscribers: Closed over 27.22 so still might get in with risk under 26
TLT (iShares 20+ Year Treasuries) 124 major resistance to clear
UUP (Dollar Bull) Inside day under the 50 DMA
FXI (China Large Cap Fund) Talk about a protracted bear market. Need an UNG type reversal here
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