Central Banks: Defenders of the Market

July 23, 2016

Mish's Daily

By Mish Schneider


mdaily20160725

On June 13, 2016 I wrote a piece on the Rallysaurus. The main point, “The Rallysaurus slowed down markedly at the beginning of 2016. Nevertheless, with many but certainly not all continuing to enjoy top of the food chain status, the Rallysaurus still lives.”

Here we are 5 weeks later. Flash Gordon has entered the scene. For those too young to know, Flash is regarded as a significant influence of early Superhero comics characters. Created in 1934, Flash is a Yale University graduate who becomes an astronaut that travels to different planets.

In the photo above, Flash Gordon is “marooned on a monster-infested planet torn by war.” Sound eerily familiar?

Here on planet Earth, the Rallysauraus, whom many believe worthy of its own comic strip, continues to roam freely. Thwarting ray gun attacks fired from Brexit, terrorism and home-grown political hoopla, nothing seems to stop it.

This past week, the Dow made history. Closing higher 4 weeks in a row and ending the week with yet another new all-time high, this Rallysaurus has the strength of Tsak, the two-headed green monster.

If one of Tsak’s head resembles the Dow, the other wears Semiconductors’ face. On a tear, SMH not only had a breakaway gap on the daily chart, but on the weekly one too. A rare sight indeed.

Meanwhile, we continue to witness a divided Modern Family made up of Semiconductors, yes. But also Russell 2000, Retail, Regional Banks, Transportation and Biotechnology.

Have those sectors ignited enough? What more must they do?

Examining the Family by phases, Biotechnology even with its new found antlers, lags behind. Technically, it seems to be forming a solid base that breaks out over the 200 DMA. That would take it from Recovery into an Accumulation phase.

As the word suggests, we will look for an “accumulation” of cash or “smart money” to begin to buy for a longer term position.

The financials, particularly the Regional Banks KRE, have a shot of playing serious catch up. KRE must hold 40.00, and close July over 40.45.

Retail, however, has some ways to go. Even consolidating over the daily moving averages, Granny looks weak on the monthly charts.

Transportation, has a similar scenario. With last week’s Golden Cross taking it into a Bullish Phase, the weekly chart looks ok. The monthly chart demonstrates work to be done.

In one episode of Flash Gordon, a rogue planet called Mongo madly rushes toward the Earth. Mongo’s orbit is controlled by an evil emperor with sinister plans for our planet. A maverick scientist hopes that with the help of Flash Gordon they can prevent impending doom.

Who are the market’s superheroes? Can THEY continue to prevent impending doom?

This week, the Central Banks and Federal Reserve armed with low to negative interest rates show up once again. As the genuine defender of this rally, we will watch to see if the Fed comes armed with yet another atomic ray gun disintegrator and thus continues to save the planet, um, I mean the market.

S&P 500 (SPY) New high close. 215.80 the 10 DMA closest support

Russell 2000 (IWM) Best close but Consolidation pattern persists.

Dow (DIA) Inside day on Friday. 187 a target if 183.80 holds

Nasdaq (QQQ) 115 next resistance Support 112

XLF (Financials) 23.60 pivotal and where it closed above. If clears could see 23.80 or higher. 23.45 first line of support

KRE (Regional Banks) Held 40.00 which is good. Now, must end this week over 40.45 to change longer term trend to up

SMH (Semiconductors) Still looks great

IYT (Transportation) 143 pivotal and over 147 game changer

IBB (Biotechnology) Should hold 273.25 if good now and at some point clear 287

XRT (Retail) 43.75 now support. Must now clear 45.80 for the month to be a game changer

IYR (Real Estate) Great follow through and now 84 support

ITB (US Home Construction) Continues to Consolidate

GLD (Gold Trust) Narrow range, inside day. Still bullish

SLV (Silver) Narrow range, inside day. Still bullish. Over 19.05 looks good

GDX (Gold Miners) A gap over 29.00 should be followed. Otherwise, an inside day

USO (US Oil Fund) I would get interested over 10.88

OIH (Oil Services) 27.90 ultimate risk

TAN (Guggenheim Solar Energy) Like to see this clear 22. 21.20 support

TLT (iShares 20+ Year Treasuries) Fed meeting this week. Still in a bullish phase

UUP (Dollar Bull) 25.06 pivotal support

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