How Many Traders Does It Take to Change a Lightbulb?

April 23, 2017

Mish's Daily

By Mish Schneider

blankHow many hard hats does it take to remove a sapling?

Apparently five. One to control the forklift and four to stand around and watch.

Ok, derivation of an old joke. However, applicable to last week’s market action.

First off, while one guy does all the work, the others fold their arms and inspect.

Secondly, the forklift appears like overkill considering the size of the sapling.

Thirdly, the observers stand far enough away to avoid I imagine, getting hit not by the tree but by the machinery.

In the market, Technology and the FANG stocks did all the work. Many other sectors stood around with arms folded inspecting the move.

The NASDAQ forklift looks like overkill considering the increasing uncertainty on both economic and geopolitical fronts.

Why would the observing sectors stand far enough away from NASDAQ?

What might they be protecting themselves from?

Each of the current market concerns alone could be as small as a sapling.

However combined, one can easily understand why the market indices, all trading close enough to their highs, cannot see the forest from the trees.

This weekend the French elections take place. Sentiment perceives a LaPen win as a negative.

Russian interference still looms. North Korea has not gone away.

Domestically, the Health Care deal or no deal, reemerged. Tax Reforms remain vague. Threats of a government shutdown surfaced.

Trump has completed 92 of the first 100 days. The Warning Phases in all of the Modern Family sectors (besides Semiconductors) illustrates a market losing its patience waiting for economic expansion policies.

Billionaires like Paul Tudor Jones say, “U.S. Stocks Should Terrify Yellen.” Why? The value of the stock market relative to the size of the economy is bloated, making current stock levels unsustainable.

See what I mean? Although the market has fired off defense missiles at each annoying sapling, a full-on attack and the market could go nuclear.

Last week I wrote about the different timeframes. While the short-term trend appears heavy, the longer-term trends in the most salient sectors are well intact.

So, it’s not that the market doesn’t look overall bullish. What’s scariest is an exuberant rally on hope rather than substance.

If the market rallies too soon and too fast in anticipation, the drop will occur harder and more rapidly when and if the market loses its patience.

If the market falls from here, it might set up for a better buy opportunity.

I assume there is a good reason the hard hats removed that sapling. Perhaps it’s roots were constricting essential underground wires. Maybe they plan to build something in its place. Doubtful, but maybe it’s more about beautification.

If the market can remove the saplings one by one, then perhaps the whole neighborhood will improve.

S&P 500 (SPY) Inside day. 235.57 is the 50 DMA to clear not intraday, but on a closing basis. Still in a warning phase

Russell 2000 (IWM) Inside day. Confirmed bullish phase if holds the 50 DMA

Dow (DIA) Inside day. Needs a close over 206.93 the 50 DMA to clear

Nasdaq (QQQ) Inside day. 131.60 support to hold.

KRE (Regional Banks) Optimism drove this back over the fast-moving average. Still far from the overhead 50 DMA at 55.50

SMH (Semiconductors) Inside day. Must hold 77.75. 80.00 back in focus

IYT (Transportation) 166.10 the overhead 50 DMA to clear to prove this has legs

IBB (Biotechnology) This must clear and close over 292.80 to return to bullish and hold around 285-282

XRT (Retail) Inside day. Now 43.83 the 200 DMA is in the story.

IYR (Real Estate) 79.00 the 200 DMA to hold. 81 some resistance

GLD (Gold Trust) 125 in focus if holds 120

SLV (Silver) Held the 50 DMA again. 16.85 pivotal

GDX (Gold Miners) Closed over the 50 DMA with a good risk below 22.60

USO (US Oil Fund) Needs to get back over 10.90

TAN (Solar Energy) 17.00 major support held

TLT (iShares 20+ Year Treasuries) closed right under 123.55-pivotal

UUP (Dollar Bull) 25.50 area support on multiple timeframes

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