January 22, 2015
Mish's Daily
By Mish Schneider
Tom Petty and the Heartbreakers (sort of)
What do you get when you add a formidable trading range, a line in the sand moving average/phase change and an Italian Banker journalists are calling “one you can trust?”
I went down memory lane earlier today, thinking about inflation and how we really haven’t had any since the early 1980s, the days when buying soft and hard commodities were the gifts that kept on giving.
ECB projections (stated anonymously) show the announced measures by Draghi should boost the euro area’s inflation rate by 0.4 percentage point this year and 0.3 percentage point in 2016. It’s been 35 years since out-of-control inflation headlined the economic news.
That makes me wonder if Janet Yellen will consider a more hawkish stance vis-à-vis US interest rates and let them firm up a bit if she doesn’t have to worry as much about a global recession or deflation.
I ask that as the long bonds dropped today although managed to hold on to the key support at 132.50. (TLTs).
The real juice from the ECB action came in the form of the unconfirmed positive phase changes in all four indices. Like with The Beatles, go ahead and choose your favorite, they all pulled together to make sweet music on Thursday. Personally I like Ringo, the drummer, or how I see the small caps, Russell 2000s. However, Lennon or NASDAQ led the band impressively thereby winning the race as the closest index to test and maybe take out the January Range high 104.20 as the week ends.
By the time Ringo gets to sing the only 2 songs he wrote for The Beatles (Don’t Pass Me By and Octopus’s Garden), NASDAQ will most likely be on new highs.
Where does that leave Paul and George? Paul as the S&P 500 should keep pace with John (QQQs) for the lead. George (the Dow) should lend a spiritual influence and get the numbers back over 18,000 which will make everyone sing “Here Comes the Sun.”
S&P 500 (SPY) Unconfirmed Bullish Phase 204.75 the 50 DMA this needs to defend to confirm the better phase. January high 206.88
Russell 2000 (IWM) Unconfirmed Bullish Phase 117.23 the 50 DMA this needs to defend to confirm the better phase. January high 120.56 far
Dow (DIA) Unconfirmed Bullish Phase 176.82 the 50 DMA this needs to defend to confirm the better phase. January high 179.23
Nasdaq (QQQ) Unconfirmed Bullish Phase 103.27 the 50 DMA this needs to defend to confirm the better phase. January high 104.20
XLF (Financials) Cleared 23.75 yet still far from the 50 DMA at 24.30
KRE (Regional Banks) Saved by the ECB but still with overhead resistance
SMH (Semiconductors) Here is another sector that cleared the Calendar range for a new 2015 high, as expected
IYT (Transportation) Close to the January high
IBB (Biotechnology) Already well above 310 which was its calendar range high.
XRT (Retail) Far from the January high but back to unconfirmed bullish
IYR (Real Estate) Turnaround to new highs
ITB (US Home Construction) If the market turns back down, I would go here first for shorts
GLD (Gold Trust) Another good close for the yellow metal
USO (US Oil Fund) In the end held 17.40 and the January low
TAN (Guggenheim Solar Energy) 2 Inside days after making new multi-year lows
UUP (Dollar Bull) 25.00 wow
EWG (Germany) 27.50 key support
FXI (China Large Cap Fund) Blast off
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