August 20, 2015
Mish's Daily
By Mish Schneider
Taking a guess on how the market will fare Friday, I say based on the Dow (DIA) making a new multi-month low Thursday, if DIA can trade above 171.40 level early on and hold, especially since a reasonable target came within reach on Thursday of 170.21, close enough to the 23 month moving average, the market will close green.
Also important to consider is that the 2015 low in DIA, 170.10 held up for now.
That’s not to say damage hasn’t been done or that Thursday was necessarily the low. When I look at the charts and think in “stream of consciousness”, I do not see the end of days, 10% correction many are calling for.
In fact, I began this week warning both the bears and the bulls that we have all become the market’s sheep, led around the periphery of the ginormous pasture or 2015 trading range.
Bullish sentiment remains low and cash positions since July are at a multi-year high. Seems that the DIA will most likely consolidate, maybe even rally back to 174, then sell off again, consolidate, rally, sell off, rally, consolidate etc. In other words, if bears are looking for the easy money of 2008, or bulls the “buy the dip” easy money of 2013-better think Baaaa instead!
If you love the word ‘bubble” as the impetus for a crash, China (FXI) contributes to the concern. On the weekly chart, a close under 38.40 will be the first close under the 200 week moving average since December 2013. FXI took seven months thereafter to clear back above that moving average.
Not too far above the 200 week moving average is the 80 month moving average at 38.80. The measured move to around 35.00 is a reasonable consideration for a target if FXI closes out August beneath those levels.
Ironic that Sheep are the Chinese Astrological Symbol for 2015.
How might commodities do considering their countercyclical history to equities?
DBA, the ETF for Agricultural and DBC the ETF for the Commodity Index Fund are two reliable indicators. Both have been in bearish phases for a year.
With longevity in bear phases, both ETFs could certainly improve and recover. Equally, they tried to recapture the 50 DMA a couple of times this year already. Neither have come close to taking back their 200 DMAs.
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” Charles Darwin.
S&P 500 (SPY) Just to give perspective, the 2015 low is 197.86.
Russell 2000 (IWM) A weekly close under 118.85 will be a sign that the 2015 low 114.20 is soon come.
Nasdaq (QQQ) Here’s more perspective-this is not even at the July low 105.89 let alone the 2015 low 99.36.
XLF (Financials) 24.49 the 200 DMA, which is far from the lower July low and super far from the 2015 low 22.89
KRE (Regional Banks) 41.65 support 42.00 pivotal and 41.35 the 200 DMA
SMH (Semiconductors) Look here though, and the picture is bleakest. Oversold.
IYT (Transportation) Call 144 the line in the sand to remain friendly here
IBB (Biotechnology) 342.18 the 200 DMA
XRT (Retail) 91.04 the February low Through 94.75 better
IYR (Real Estate) 75.39 the 100 DMA which if holds this still can look good. Under troublesome
XHB (US HomeBuilders) Nasty reversal but to support
GLD (Gold Trust) Overbought. In a new unconfirmed recovery phase
SLV (Silver) Has to clear 14.92 and hold the 50 DMA at 14.63
GDX (Gold Miners) Got right to the 50 DMA and stopped. Needs to clear 16.00 for at least 2 days
USO (US Oil Fund) Could have been a blow off bottom but need some more proof before laying money on that
TAN (Guggenheim Solar Energy) One day this will be back. 31.01 is the 200 week moving average to clear
TLT (iShares 20+ Year Treasuries) Flight to safety but still no word from the FED
UUP (Dollar Bull) Confirmed warning phase
EEM (Emerging Markets) Even higher daily volume for this year with oversold conditions so a blow off possible here. Over 33.97 is worth a pop
JO (Coffee) Sitting on the 50 DMA
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