Ducks: Calm On The Surface, But Paddling Like The Dickens Underneath

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Michael Caine

In the April 30th daily commentary, I speculated on 3 possible scenarios for the Russell 2000s that I would be mindful of. To review, 1) IWM sells off just a bit more, maybe even another rush to the exits and then, goes back to rallying testing recent highs. (We saw May 1st open higher with better follow through on May 4th-hardly enough to figure new highs since IWM never cleared the 50 DMA).

2) IWM bounces meagerly from here, the bounce that provides a short opportunity and we see the May adage come to fruition. (BINGO so far!)

3) Probably least likely, IWM consolidates at the low end of the 3 month trading range (or range within the range) and goes into summer doldrums early. (March 10th low is 119.83 so it is still possible that IWM holds there and does indeed continue to chop around, consolidating. It can even go as low as the 2015 low 114.20, but that would be painful. However, it would prove that the pasture or trading range is more like a 5-month range. Currently, the 3-month range has been a range within a range.)

One more note is that 120.56 is the 6-month calendar range high in IWM. On Tuesday, although it traded below that level intraday, it ultimately managed to close above it.

The 6 charts I’ve used to represent the macro picture: Russell 2000s (IWM), Retail (XRT), Regional Banks (KRE, Semiconductors (SMH), Biotechnology (IBB) and Transportation (IYT) and how they rotate from one another yet ultimately stay within the boundaries of the range is where I have focused all year.

So yes, I can say they are all range bound-but have they offered any real clarity? As much as the Dow at 18,000 has, which considering it is back beneath, we can say not too much if you are a trader who looks ahead for more than 1-2 days.

And that’s the rub. Many Commodities (oil, certain metals, cotton, and maybe sugar) have paid off from the basing action. Rates keep firming-that’s still very much worth paying attention to. Otherwise, a scalper’s delight and tough going for trend traders.

Monday night, I did advise we stay calm, but definitely not complacent. And here’s the silver lining potential- NASDAQ did not fail the 50 DMA or Bullish Phase literally until the last minute of the day- where the leading 100 stocks live.

S&P 500 (SPY) What to do when you confirm a bullish phase only to return to an unconfirmed warning phase?

Russell 2000 (IWM) Held the January calendar range low. But closed weak under the 100 DMA

Dow (DIA) Like SPY, confirmed a bullish phase only to return to an unconfirmed warning phase.

Nasdaq (QQQ) 107.55 support held. Then, 105.45. But it this is to lead, then has to take back and now over 109

XLF (Financials) Sloppy but held the bullish phase

KRE (Regional Banks) 40.95 the support to hold and over 41.50 looks better

SMH (Semiconductors) Unconfirmed warning phase and the chart since 2015 began looking like a big crab creeping along

IYT (Transportation) 152 support and unless it gets back over 156.34, could see that support

IBB (Biotechnology) 331.94 support with a move over 350, as farfetched as it sounds, much healthier

XRT (Retail) As much as I dread writing this, 93.00 seems more likely than 103

IYR (Real Estate) New 2015 lows-not part of the modern family, but still not a healthy sign

ITB (US Home Construction) Unless this gets back over 26.62, looks heavy

GLD (Gold Trust) Unconfirmed phase change to recovery

GDX (Gold Miners) 20.00 near term support. 17.00 the big support and over 21.30 a game changer for real

USO (US Oil Fund) Gapped higher and onto 2015 highs

TAN (Guggenheim Solar Energy) 45.00 the 50 DMA

TBT (Ultrashort Lehman 20+ Year Treasuries) 47.54 2015 high in TBTs until Tuesday-now its 47.61 with an inverted hammer doji candle

IFN (India Fund Inc.) After the potential bottom, it has an inside day just under the 200 DMA

EWI (Italy) 14.80 huge support

CORN (Corn) 2014 low 22.62. Tuesday low 22.86 then a bounce-maybe a bottom-needs more evidence

BAL (Cotton) Futures look good and even better over 68.00

SGG (Sugar) Cash back over $13.00 interesting