Face Value: In the Eyes of the Bull or Bear Beholder

April 6, 2016

Mish's Daily

By Mish Schneider

“Nowadays people know the price of everything and the value of nothing.” -Oscar Wilde

First off, thanks to Geoff Bysshe for writing the Daily last few days and giving me a much needed break!

Since I had time to think, I found myself pondering the idiom, “take something at face value.” If you replace the word “something” with “anything” you have a smart credo for trading and for life.

Replace “something” with the market action and you have a trader’s dilemma. Face Value is often in the eye of the beholder.

Face value is also accepting something just as it appears. It implies accepting something without thinking about what else it could mean.

There’s the rub. We traders spend our careers not only trying to accept “what is”, but also trying to assess what else “what is” really means.

Today’s session is a perfect example.

Since I wrote about Biotechnology IBB last Wednesday March 30^th, as the “wild card,” once it held 250, if you took that at face value, you bought it against the lows and enjoyed the ride. More substantially, as the Big Bro of my Modern Family, after lagging behind the rest (IWM, XRT, IYT, SMH and KRE), we now have a new measure to judge how the rest of the family is doing based on how IBB behaves from here.

Biotech Behave!

By the time IBB gets to (if it gets to) 290, it should be pretty well overbought. Looking at this move though, in the spirit of face value, we need not worry about that level just yet.

As one who still prefers to see all members of the family heading in the same direction, IBB does indeed allay a lot of bearish sentiment for the bulls.

Transportation (IYT) to me, is where we need to look as our IBB has a party. First to run in early February, it became the obvious leader. Now, back beneath a weekly moving average, the 200 DMA plus failing to cross the 23-month MA, this level is critical.

Should IYT get back over this week’s high, face value-don’t argue. If it fails this week’s lows, say hello to 132.

With the other members of the family, I always find the Russell 2000 most compelling to watch. Most likely, if IWM clears 111.32 or Monday’s highs, regardless of the reason, the move up should continue. A break of 108, different story.

Then there’s 204 price level in the S&P 500. Talk about face value! 204 has held up “tighter than a facelift and flyer than a spaceship.”-Nicky Minaj

Yet, the Family as a whole remains divided.

Although I still find it difficult to fully assess the “what is” in the market right now, (KRE-our Prodigal son still lags) I do find these very clear price values in key members of the family extremely comforting.

Lots of swing trading opportunities have yet to emerge for the both the patient bulls and bears. In the eyes of this beholder, I’m good with taking a bit more time considering the “what is” from the “what ifs.”

S&P 500 (SPY) I do wish I believed more strongly in this rally. If you look at the chart, I should. 207.14 point to clear

Russell 2000 (IWM) 110-108 major support with over 111.32 see 112.50 and perhaps 113 the 200 DMA

Dow (DIA) Over 178.20 could go to new highs. And it really has support all the way down to 170

Nasdaq (QQQ) Working to fill a gap to 111.84 if holds 108

Volatility Index (VIX) Fear still a loser-watch for a flush down day on huge volume.

XLF (Financials) 22.50 pivotal area

KRE (Regional Banks) 36.50 support. 38.50 to clear if good

SMH (Semiconductors) 55 pivotal.

IBB (Biotechnology) 276 big area to hold

XRT (Retail) Granny cleared the 200 DMA and now must stay there at 45.18

IYR (Real Estate) Already well outperforming, has to hold around 77.00 now

ITB (US Home Construction) Looks good