December 27, 2015
Mish's Daily
By Mish Schneider
Hot Prospects for 2016
Finally, Christmas is here and by the time you read this, possibly gone!
We can leave reindeers, Santa and the National Lampoon’s Christmas Vacation behind us now and move ahead to 2016.
2015 lived up to its Chinese Astrological New Year sign of the Sheep. With the exception of only a few periods of volatility, the market remained relatively flat. Peaceful grazing within a fairly wide trading range dictated most of this year’s action.
Our Modern Family will continue to have many adventures as we head into the New Year. I am particularly eager to see how the Year of the Monkey plays out!
With all in either bearish, distribution, or warning phases, first thing we will look for is whether or not the family members can have positive phase changes, particularly the Granddaddy himself, the Russell 2000s.
From there, we want to see how Granny Retail (XRT) and Transportation (IYT) do.
With Semiconductors (SMH) and Regional Banks (KRE) floundering around their 50 and 200 DMAs, they will be of particular interest.
Biotechnology (IBB) could very well be the best wild card of all as the end of the year has brought it back to life. Watch for the chance of seeing a move over the 200 DMA at 348-349 after months of consolidation beneath that level. Otherwise, we can discount last week’s rally as a short opportunity that will keep on giving.
Perhaps the most exciting aspect of next year will be the areas that have had prolonged bear moves that could now, finally bust a move. Some have already showed us signs of resurrecting.
At the sake of repetition, the top ten megatrends to watch in 2016 are and will continue to be a reliable place to look for both buy and short opportunities.
By solar, video gaming, 3D printing, and social media (to name a few) either finding new bases or rallying from solid price consolidation, there will be lots of great low risk choices to choose from.
The Commodity ETFs DBA and DBC are hot prospects. Both ended the week with bottoming formations that I will look to for further confirmation and for a possible emerging cycle from bearish to bullish as 2016 evolves.
Interest Rates and the historic change from zero to a slight rate increase are another focus. If Long Bonds decline further, that will create a whole new paradigm from the old “rates up, commodities down”.
One general theme for next year seems fairly certain to me. Considering geo-political uncertainty will abound, peppered with a plethora of political bantering here at home, peaceful sheep shall morph into volatile monkeys.
Potential short trades should be equally compelling as many of the long ones that are currently setting up.
Bottom line is we must start the new year keeping an open mind.
Therefore, my end of year advice is to rest up, have a balanced perspective and mark this as your happiest, healthiest and most prosperous New Year ever!
Thanks to all of you for your support and readership. My gratitude has no limit.
Geoff Bysshe will write the Daily commentary until my return on January 4th!
S&P 500 (SPY) Tried the 200 DMA and could not close above it. Not convinced yet this will do much more this week, I would watch 200-206.50 as the range to break one way or another
Russell 2000 (IWM) 115.85 resistance. A failure of 113.60 would tell me perhaps we won’t see a test of that resistance this year
Dow (DIA) Could not confirm the bullish phase with a second close above the 50 and 200 DMAs. 176 -174 the closest range to watch this week
Nasdaq (QQQ) Also could not get the second close above the 50 and 200 DMAs necessary to confirm a bullish phase. 111.84 support with 112.75 point to clear to see 114
Volatility Index (VIX) Closed the week on the 50 DMA
XLF (Financials) Once this breaks 23.20 seems to suggest a new trend lower. For now, in a bearish phase which means until that changes, not a contender
KRE (Regional Banks) Although tried, could not clear the 200 DMA on a closing basis. Needs to. Under 41.00 lights out.
SMH (Semiconductors) If 54.10 the 200 DMA can hold look here. Then it must clear 54.65 the 50 DMA. Under 52.50 trouble
IYT (Transportation)140 substantial resistance with 135 pivotal.
IBB (Biotechnology) 335 has to hold. Furthermore, it must get passed 342 and stick.
XRT (Retail) 43.25 closest support to hold. Then, the ultimate point to hold is 42.00 On the upside, it’s all about 45.00
IYR (Real Estate) Corrected back to the moving averages. 74.60 area would be a really good place to hold if good
ITB (US Home Construction All about 27.70
GLD (Gold Trust) 102.25 if good, should hold. Over 104 better
GDX (Gold Miners) Over 15.00 worth a follow long
USO (US Oil Fund) More short covering. 11.00 should hold if good
OIH (Oil Services) Those 2-day reversal patterns are awesome when they work. Now, question is will that reversal stick as a bottom in place?
XLE (Energy) 60.80 support to hold. 64 big overhead resistance
XOP (Oil and Gas Exploration) 31.65 resistance to clear
UNG (US NatGas Fund) Nice but needs to fill gap to 7.82
TAN (Guggenheim Solar Energy) Over 33 is an add.
TLT (iShares 20+ Year Treasuries) Closed on 121.75. Watch that area as pivotal now
UUP (Dollar Bull) Looking at the weekly charts, this looks higher longer term. 25.21 support
EWP (Spain) Confirmed island bottom. Give it a bit more time to prove itself
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