August 5, 2015
Mish's Daily
By Mish Schneider
Wendy Williams, Kraken: The Curious, Exciting, and Slightly Disturbing Science of Squid
As I look around the ocean observing the Octopus, I find the analogy to the current market comforting and scary all at once.
Even though I’ve taken an alternative route away from the Modern Family in text, in theory, I am substituting Octopus arms for the members of the Family to try to ascertain whether our creature can glide or will exhaust itself from swimming too hard.
Naturally, I begin with Granddad Russell 2000 (IWM). This index remains in a warning phase with a declining slope on the overhead 50 DMA. The attempt to rally beyond last Friday and this past Monday’s highs failed. The 200 DMA now lines up perfectly with the July 6-month calendar range low.
Granny Retail (XRT) tried harder, but that too could not make it over the declining slope on its 50 DMA. Regional Banks (KRE) look better over the 50 DMA which means the underlying support around 42.00 should hold and if can continue, would not rule out new all-time highs at some point.
Transportation (IYT) hit the 100 DMA and retreated some. However, with clearance between current levels and the 50 DMA, we can still bank on the July low as the bottom for longer.
Biotechnology (IBB) looks the most promising of all the Family members. If can clear 392.32, will begin to negate the topping pattern in place from July 20th.
Semiconductors (SMH) could very well hold up now after a confirmed bottoming pattern from July 27th. What would help a lot, is if it holds 51.00 and clears 53.00.
That’s six of the Octopus’s eight arms right there. The commodities arm looks nearly severed. Good news is that when an octopus loses an arm, it grows back. So too will commodities revive at some point with all instruments oversold.
Comforting for our metaphor are the two rudder arms (IYT) and (SMH) holding up. Scary is the arm named Russell who cannot seem to hold rallies for too long. We can call the eighth arm the Dow (DIA) for now. DIA is not giving us deep sea divers much in the way of warm fuzzies either.
Octopuses are solitary creatures with extremely sharp eyesight. They hide in caves and look out for danger. Regardless of how the momentum trades are doing, overall for establishing new long positions and given the Modern Family scenario, make like an Octopus.
S&P 500 (SPY) Unconfirmed bullish phase with 210 pivotal
Russell 2000 (IWM) 124-125 resistance with 121.20 key support
Dow (DIA) 174.44 is the July 6-month calendar range low to hold.
Nasdaq (QQQ) An impressive session no doubt on Wednesday, but perhaps not impressive enough since we have 3 highs around 113.10 that need to clear. Now, after Tuesday’s inside day, (it traded within Monday’s range), Monday’s low 110.86 is the support to hold
XLF (Financials) 25.35 next point to clear with 24.94 point to hold
KRE (Regional Banks) Cleared into an unconfirmed bullish phase if holds a second day over 44.00
SMH (Semiconductors) support around 51.00.
IYT (Transportation) Performing well and now must hold over 148.50
XRT (Retail) Over 100 good, which is a number we have traded up and down and around, but cannot clear since early July
IYR (Real Estate) Needs to hold 74.00.
XHB (US HomeBuilders) 36.66 support
GLD (Gold Trust) Needs a sharp reversal pattern to avoid lower prices.
USO (US Oil Fund) Another new 2015 low
UNG (US NatGas Fund) If holds of 13.00 ok to still watch
TAN (Guggenheim Solar Energy) Reacted well with FSLR rocketing but not really trusting the ETF just yet
TLT (iShares 20+ Year Treasuries) 120.57 major support and 124.40 the 200 DMA resistance
UUP (Dollar Bull) Quite firm
FXI (China Large Cap Fund) 40.00 pivotal
CORN (Corn) Maybe trying to hold here over 23.00
JO (Coffee) Watch to see what happens over the 50 DMA
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