Lemonade Made From Artificial Flavors; Furniture Polish Made From Real Lemons

November 3, 2014

Mish's Daily

By Mish Schneider

Alfred E. Neuman

I haven’t written about life in a technical bubble in quite some time. I thought I had good reasons of course; let’s face it, the news around the globe on pretty much all accounts made the bubble seem more ostrich-like than usual.

However, as I surfed the offerings on NFLX over the weekend, I came across a documentary called, Tiny, A Story About Living Small (a new trend in downsizing one’s domicile); hence, my thought about the tiniest place a trader can live-inside the bubble!

The Tech bubble would have gotten us short the Dow on September 23rd after the reversal candles. On October 15th we would have covered the short, then on October 20th, it would have gotten us long.

Looking at the present, the Dow (DIA) made new highs early on, sold off from those highs, had a narrow trading range with less volume than it had last Friday (scant volume compared to its average as well). Clearly warrants a head’s up, perhaps a strong warning to new longs, but not a sell signal at this point.

The Russell 2000s could not match the September 3rd peak high; yet, corresponded with a 60-day high and close near the intraday lows as this week begins. The weak link of 2014, IWM merits close eyes as we head into midterm elections and a week chock filled with earning reports, economic data, concluding with the jobs report.

Then there are the QQQs or NASDAQ. That not only confirmed the runaway gap, but also left itself open to a reversal after making new highs.

What’s a resident of the tech bubble to do? DO vote, because as a US Citizen it is your right and your duty to do so, but DON’T watch the pundit’s remarks on the results and their implications. DO exit positions ahead of their earnings report but DON’T pay any attention to the economic data. As an alternative, DO look for confirmation on aforementioned possible warning signals inside the bubble, and whether or not confirmation materializes, trade accordingly.

S&P 500 (SPY) Possible double shooting stars. Love this candlestick formation as it can really tell us whether a trend is about to go ballistic or go the way of the dinosaur

Russell 2000 (IWM) Held Friday low which tells me Monday session more of a digestion-if it continues to hold 115.70 that is

Dow (DIA) 173 important to hold but really, looks ok even up here

Nasdaq (QQQ) Tech bubble-don’t argue with a runaway gap, unless this gaps under Friday’s low

XLF (Financials) Overbought and on new highs

KRE (Regional Banks) Worked off some near-term overbought conditions

SMH (Semiconductors) Semis back with room to recent swing high

IYT (Transportation) Still see new highs coming

IBB (Biotechnology) Rest more than a call for a top

XRT (Retail) 88.00 a swing level of support to hold or not

IYR (Real Estate) I did tell you all this would go to new highs-hope you made money

ITB (US Home Construction) I really like where this held with an inside day.

GLD (Gold Trust) Blow off volume Friday, inside day light volume Monday-the makings of a bottom to watch for