March 2, 2014
Mish's Daily
By Mish Schneider
Quote: Rocky- the Rapper
Generally, I do not tune in so much to the “opinions” of talking heads or even a lot of analysts, fundamental or technical, as I typically find the charts tell me everything I need to know. Once other opinions come into the mix, my “vision” becomes “blurred.”
With that said, last week, I wrote a lot about the dichotomy surfacing with a market on new highs and the volatility index forming a solid base, suggesting some wild times ahead. Historically, volatility blows out when the market experiences a hard correction.
I thought using the Rocky IV allegory would be somewhat original in describing the tensions that exist in Russia and the Ukraine, but John Kerry, US Secretary of State, mentioned it as obvious, “We do not believe this should be an East-West, Russia-United States. This is not Rocky IV, believe me. We don't see it that way."
In "Rocky IV," the title character travels to the Soviet Union to take on Soviet boxer Ivan Drago. I’m not sure if Kerry was trying his hand at levity, or whether he had Oscar night on his mind; regardless, the real point is that the now more obvious reason for the dichotomy with the volatility index and a strong US market has indeed surfaced.
The market hates uncertainty. Therefore, looking just at the Dow (DIA) chart (which filled the gap to 162.79 and closed above it) one would say the market did what it had to do and remains poised for higher. However, dramatic political news or social unrest will supersede the technicals, forcing most investors out of their comfy technical bubble. And then there’s the VXX (Volatility Index).
S&P 500 (SPY) New high close with strong volume-accumulation. Also, a unique situation in not being overbought.
Russell 2000 (IWM) Closed red but not weak enough to call it a reversal candle after making new highs. However, a gap down Monday not defended with buying, would be reason for caution.
Dow (DIA) Filled the gap as mentioned and now has to defend the Friday low
Nasdaq (QQQ) Closed red with a doji candle (open and closing prices virtually the same). Like IWM, what happens early Monday will be more telling.
XLF (Financials) Confirmed the bull phase and has to clear 21.75 to move away or defend the 50 DMA to stay a contender
SMH (Semiconductors) Sideways congestion strong chart
IYT (Transportation) bull phase and has to clear 132.97 to continue
IBB (Biotechnology) First time this has broken the fast moving averages since the beginning of February. Needs to repair therefore could go lower first
XRT (Retail) 88.26 January calendar range high far away. With 85, near term, area to defend
IYR (Real Estate) New 2014 highs and looking firm
XHB (Homebuilders) With overbought conditions, could correct a bit from here with 33.00 underlying support
GLD 126 the ultimate support with a move over Friday’s high positive
USO (US Oil Fund) Hasn’t been over 37.50 since October 2013-finding that area resistance but doesn’t look like it for long if holds over 36.20
TBT (Ultrashort Lehman 20+ Year Treasuries) 68.12 the low of 2014 thus far
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