January 15, 2015
Mish's Daily
By Mish Schneider
Even before the market opened this Thursday, the “experts” tweeted busily on my twitter stream. “Oil Advances as OPEC Forecasts Slower Growth Supply In U.S.” “Bank of America Sees Oil Lower for Longer. New Target on Brent Oil at $31.00 and WTI at $32.00.” “Big Banks Stumble.” Bank of America Beats By $0.01, Misses on Revs.” “Yellen Is Gearing Up For The First Rate Increase Since 2006.” “Fed’s Rosenengren Says He Wants to Hold off on Rate Hike.” And so forth and so on.
You get the picture. Fast, furious and contrary. Oh my. There are 2 distinct conclusions one can make from the constant onslaught of opposing information and oftentimes opinions. 1. Listen to none of it and make decisions based on price alone, (plus use a consistent, sound and repeatable strategy). 2. Listen to all of it and if a segment of the market you are interested in has opposing stories, avoid trading in that arena altogether.
I find this particular theme extremely important in the current market condition. After all, we do have an accelerating warning phase in the indices, while we also hold the bottom of the trading range from the December lows. Earnings season gears up, which probably means more volatility in store until around mid-February (also coincidentally corresponds with the start of the Chinese New Year, the end of the Horse and the beginning of the much more docile Sheep.)
Friday the official six month calendar range activates, which looks amazingly synchronistic to the December to January range.
Here is a textbook opportunity with two powerful ranges lined up. That means avoid excessive analysis and any emotional baggage. Simply follow the way the range breaks.
S&P 500 (SPY) Marginally oversold but not looking too good right here. Unless, it opens higher and closes over 201.
Russell 2000 (IWM) Holding the January low 114.36 so far and then we will have the December low. Not a firm line in the sand given the market weakness unless, it clear 115.50 and stays above
Dow (DIA) 172.86 is one area of support then the December low 170.74. Otherwise, we need to see this recapture 175.
Nasdaq (QQQ) Took out all the aforementioned lows and now we need one more index to join that for a confirm.
XLF (Financials) Hello 200 DMA
SMH (Semiconductors) Held 52 but might not for long
IBB (Biotechnology) Ouch, broke 310. The 50 DMA 303.06
XRT (Retail) Double top at 97.15 confirmed by breaking the 50 DMA well
IYR (Real Estate) Still strong but nothing holds up forever if the market continues to weaken
ITB (US Home Construction) When the Music’s Over…
GLD (Gold Trust) Closed on the 200 DMA, first time since August
USO (US Oil Fund) 2 day wonder. We are out with a small profit which is fine given the falling knife theory
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs The volume on Wednesday was buying by some pretty smart people-Blast off to new highs.
UUP (Dollar Bull) No real concerns unless it breaks 24
FXI (China Large Cap Fund) 42.00 down to 41.62 is the area to hold. Just such a hard thin ETF to trade
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