May 21, 2018
By Mish Schneider
When a nest works out, birds will come back to the same spot to build a new one to lay their spring eggs.
Our cactus wren did exactly that.
3 eggs sit among the prickly bits of the cactus.
3 eggs, safe and sound.
Makes sense that after the weekend Daily featuring the love of the market “sealed with a kiss” between the Russell 2000 (IWM) and his kin, Transportation (IYT), that babies come next.
With IWM making a new all-time high at 163.24, and IYT clearing 195, we can declare the wedding a success.
However, some sectors had a hangover from too many “vices.”
Technology and NASDAQ, although green on the day, rallied to resistance and then backed down.
Biotechnology, necessary to prove that spec interest remains robust, closed red.
Elsewhere, the dollar’s strength might have reversed.
Interest rates, which began the day firmer, closed basically unchanged.
Added to the mix, commodities, particularly corn, cotton, oil, sugar and even gold miners, performed well.
Although we passed the “wedding crasher” stage, will these vice-laden instruments prevent the hatchlings from being born?
IWM, with a relatively low volume all-time high today, remains the best hope.
And, IYT, as long as it holds 195, gives bulls comfort.
Furthermore, Granny Brick and Mortar Retail (XRT), with another round of earnings this week, holds over 46.00.
Semiconductors (SMH) were the catalyst of the last correction.
SMH has yet to clear 107.25, which would surely bring back buyers.
For now, SMH must at least hold 103.80-104. Othewise, that vice can spread like a disease.
Regional Banks, KRE, the Modern Economic Family’s Prodigal Son, enjoyed a rally today as well. 65.23 is the all-time high, not too far away.
Yet, KRE’s success could also imply some trouble for the market.
Savers looking for interest to collect on their money, could move that money to banks and away from anything considered riskier, like stocks.
Yes, we are happy with what IYT and IWM are doing.
And yes, we are happy with the lower volatility.
But before we start passing cigars on the birth of new cactus wrens, continue to watch the vices of the weaker sectors.
And of course, watch commodities plus any sign of a slowing economy accompanied by rising inflation.
S&P 500 (SPY) 270 pivotal. 274 resistance to clear.
Russell 2000 (IWM) 160 pivotal support. 168 area target if 160 holds.
Dow (DIA) Resistance (250) with 245 support to hold
Nasdaq (QQQ) 166.50 needs to hold with 169.50 pivotal resistance to clear-got right there today.
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