If Medusa Meets the Market's Rallysaurus

October 3, 2016

Mish's Daily

By Mish Schneider

In Greek Mythology, anyone who looks at Medusa turns to stone. Has our long-in-the-tooth Rallysaurus caught her gaze?

The dinosaur, now perhaps a rock, freezes with his head up high and his mouth ajar as if roaring in frustration.

Rallysaurus’ first foray with Medusa came after the Fed raised the interest rate .25% last December. By the end of February, our Rallysaurus returned to skin and bones.

Since then, through Brexit, threats of another rate rise, political uncertainty, crises in the Middle East, terror attacks both in the US and abroad, Deutsche Bank and Wells Fargo, our Rallysaurus toughs it out.

So, are we facing a market set in stone?

Or, will Medusa’s curse be averted?

To begin this week, NASDAQ and the Russell 2000 traded within Friday’s trading range. Nasdaq sits close to its 16-year high.

The Russell 2000 maintains a bullish phase with a topping candle. The S&P 500 and the Dow, both in warning phases, weakened further but not enough to boost volatility or fear in the market.

First Solar’s stock price fell while crude oil prices rallied more. Interest rates firmed and gold and silver declined.

The Modern Family closed in the red except for Transportation. Biotechnology eked out a gain of one cent.

Transportation, Retail, Regional Banks and Biotechnology-like NASDAQ, traded within Friday’s trading range.

Semiconductors briefly made a new all-time high early on but could not sustain it. We are now waiting to see if SMH closing on the lows with better than average daily volume, turns out as a reversal top.

Conventional wisdom says do not sell a dull market. I will give the market the benefit of the doubt. With the inside trading days in two of the key indices and 5/6 of the Modern Family sectors, our Rallysaurus is not quite yet set in stone.

S&P 500 (SPY) Better if can clear/close over 217. Pivotal point 215 then 212 rock bottom support

Russell 2000 (IWM) Working a reversal top unless it gets back/closes over 124.75. The 50 DMA at 122.50

Dow (DIA) 184 to clear and must hold 180

Nasdaq (QQQ) Must close over 119 and hold 117

KRE (Regional Banks) Two Inside days now above the 50 DMA. That makes 41.40 and 42.50 the range to break one way or another

SMH (Semiconductors) Good volume, new highs and a close on the intraday low merits watching

IYT (Transportation) 144-146 the resistance to clear. 143.50 support

IBB (Biotechnology) Inside day right on the 50 DMA. Interesting spot.

XRT (Retail) Granny is trying to figure out how to unwind her own cast in stone curse

GLD (Gold Trust) 125 pivotal support

SLV (Silver) 17.75 pivotal support

GDX (Gold Miners) 25-27 range to watch