Does the Market Wanna Be Sedated?

March 18, 2017

Mish's Daily

By Mish Schneider

Sunrise Santa Fe, New Mexico.

As I sip my morning coffee, I imagine the power lines as lines on a chart and the airplane a vertical price pattern gaining momentum.

However, as a mode of transportation, the plane’s upward trajectory conflicts with the actual chart of the Transportation sector-IYT.

As a key ingredient in the U.S. economy and a sibling in the Modern Family, Trans’ lack of upward trajectory sours the sweet lift my morning coffee provides.

Likewise, other members of the Modern Family that signify the health of the U.S. economy have equally conflicting trajectories.

Yet, with the sunrise and what appears a contented pilot, each new day carries reasons for the indices to fly. So much so, the S&P 500 and the Dow have now gone 108 days without a 1% decline.

That matches the longest stretch of trading days without a 1% decline since May 18, 1995.

What will encourage IYT to return to the friendly skies? Are they indeed friendly?

Compare this chart with our morning visage.

I wouldn’t say Transportation (IYT) is heading for a crash. Nevertheless, I would advise you to fasten your seatbelts.

Unless IYT crosses back above the dotted 50 day moving average as it did in early February, remember that what goes up must come down.

Why then should we board?

Although the Federal Reserve raised the interest rates last week, they do have an accommodative attitude if they see the plane headed for a crash landing.

That sentiment reflects in 20 year bonds softening rather than strengthening in yield. Furthermore, the Dollar declined and Gold rallied.

The volatility index or fear index is carving out its own place in history. In November, the index fell to its lowest level since 2008. Since then, it continues to trade near the lowest levels over the past 5 years.

No fear of flying?

While the short-term effects of Xanax are beneficial, longer term usage can have negative effects.

To prevent future trouble with your cognitive skills, this week keep your eyes on the Transportation sector.

Watch the Russell 2000. For now, Gramps holds above the 50 DMA.

Granny Retail overdosed on Xanax ages ago. She appears disoriented.

If properly sedated, Biotechnology should hold Friday’s lows and then return over 300.

Regional Banks swooned on the 50 DMA last week, but seemingly popped another pill and closed above it.

Meanwhile, Sister Semiconductors with yet another new all-time high? I’m thinking she’s the one prescribing the anti-anxiety medication.

“Just get me to the airport, put me on a plane
Hurry hurry hurry, before I go insane
I can't control my fingers, I can't control my brain..” I Wanna Be Sedated-Ramones

S&P 500 (SPY) Not a great close to end the week. 235.74 in focus to hold or must make a swift comeback over 238

Russell 2000 (IWM) 139 next barrier to clear and 136.75 super important support to hold.

Dow (DIA) Broke below 209, caution unless regains 210.50

Nasdaq (QQQ) In good shape provided in holds 131.25

KRE (Regional Banks) 56.40 pivotal support. But if cannot close out March above 57.75, caution.

SMH (Semiconductors) Interesting candle pattern. A gap over 79.22 good. But a gap below 78.60 concerning.

IYT (Transportation) 163 in focus unless it can make a move back over 167.45

IBB (Biotechnology) Most important number? A march close above or below 298.85

XRT (Retail) Must remain above 42.

IYR (Real Estate) Sloppy chart but back above the 50 DMA

GLD (Gold Trust) Teeny inside day. Over 117.30 better. 115.25 is the closest support if good

SLV (Silver) 16.30 nearest support bulls should want to see hold