Fed Up with the FED?

January 27, 2016

Mish's Daily

By Mish Schneider


Only the worst weakest Family Member rallied.

**Tonight’s Commentary was written by Jonathan Griffin Assistant Director of Trading Education and research.

We all waited with our eyes glued to the screens for the FOMC rate decision during Wednesday’s action. Would they lower rates? Or leave them unchanged? And how would these actions affect the market overall?

When the minutes came out with the decision to leave rates unchanged from the initial increase, no one was very surprised at the lack of action from the FED, but the markets didn’t like what they heard.

The key focus of Wednesday’s report was on the language used to imply that the March meeting would hold more significance.

After the decision came out, we saw the normal 10-15 minutes of “knee jerk” volatility, and then the market showed its discontent by declining further.

As we have seen, the markets have been incredibly negative since the FED first raised rates in December, so it the Fed didn’t have a very good chance at saying anything that would put the market in a better mood.

How did the Modern Family handle the news?

During the early part of the day Wednesday we saw marginal rallies in most of the modern family before the FED spoke, After was a different story

Regional banks (KRE) After rallying through the JCRL at 35.81 early in the day this dropped back to intraday support at R1, but that represented the first 2 consecutive up closes since December!

Semiconductors (SMH) Had rallied intraday as well, having bounced from the 10 DMA, however was unable to sustain and closed the day out on the lows sitting on support at 47.91, the 10 DMA.

Biotechnology (IBB) Started the day with a test of the resistance at the 10 DMA but failed to clear and when the FED minute came out we saw a volatile sell off, leaving this down 3% on the day.

Transportation (IYT) Was an area of strength until the Fed news. After that is had a sharp selloff which found some support at the 10 DMA around 120.50 area. Whether or not this will hold remains a question.

Retail (XRT) was aimless until the news and then broke down, but managed to hold the 10 DMA for the time being. As a result, it remains unable to get back over its 65 weekly moving average at 40.59.

Lastly that brings us to Grandad Russell’s (IWM) which didn’t feel the negative pressure of AAPL like the QQQ did, and was having a decent day until the FED, news. Then it went from up on the day to the lows of Monday and closed back under the 10 DMA. It is, however, still consolidating over the recent lows, implying that it might want to go higher again before we see more of a sell off.

All and all the family did not seem to like the news, or lack thereof, weather this is a sign of more downside to come we can only wait and see!

S&P 500 (SPY) Cleared Fridays high intraday but failed to hold that on a closing basis, also failed the 10 DMA at 188.55.

Russell 2000 (IWM) Back under the 101 level and the 10 DMA at 100.05 but still has support at 99 and then at 97.43.

Dow (DIA) failed to hold over 161 but did not break under 158.67. Needs to clear back over the 10 DMA at 160.12.

Nasdaq (QQQ) Broke the holding pattern with a 2% move down, needs to continue to hold at the 100.00 level.

Volatility Index (VIX) Consolidating around the 10 DMA.

XLF (Financials) Broke out over the 10 DMA intraday but later failed and closed back under the JCRL at 21.13.

KRE (Regional Banks) Cleared 35.81 but could not close there. Still has some support at the recent lows at 34.21.

SMH (Semiconductors) Over 49 better and 47.92 support to hold at the 10 DMA.

IYT (Transportation) If this sector holds up over 120 area that is encouraging. 125 level big resistance

IBB (Biotechnology) Back under the JCRL and testing support at the recent lows. Needs to hold over 268.52 or trouble is likely to follow.

XRT (Retail) 39.81 support to hold for now.

IYR (Real Estate) 72 is the level to clear and again needs to hold at 70.71 the 10 DMA.

GLD (Gold Trust) Continued the rally after the FED minutes. 108.67 big resistance to come.

SLV (Silver) Again stopped at the December 4th high 13.94 (slightly below). Needs to clear that and then 14.00

GDX (Gold Miners) Confirmed recovery phase. Also managed to clear the 100 DMA at 14.19.

USO (US Oil Fund) 8.64 support to keep this up as well as the 10 DMA at 8.84.

XOP (Oil and Gas Exploration) Broke out of the inside day to the upside and rallied before finding resistance and giving back most of its gains. 25.30 support to hold.

UNG (US NatGas Fund) 7.65 is a good level to watch hold

TAN (Guggenheim Solar Energy) Had another test of the 25.25 level but could not muster the strength to clear.

TLT (iShares 20+ Year Treasuries) Liked the FED’s inactivity and bounced back over the 10 DMA.

UUP (Dollar Bull) Support now at 25.70 the 50 DMA.

RSX (Russia) Now back over the 13.50 area but needs to close the gap from Jan 7th by clearing 14.09.

Improve Your Returns With 'Mish's Daily'

Michele 'Mish' Schneider

Every day you'll be prepared to trade with:

  • Unique insight into the health and future trends in markets
  • Key trading levels for major ETFs
  • The 'Modern Family' advantage
  • Actionable trading ideas in stocks and ETFs across all asset classes
Subscribe Now!