May 26, 2014
Mish's Daily
By Mish Schneider
Albert Einstein
An incredibly orderly and logical (almost transparent) conclusion to last week. NASDAQachieved distance from the 50 DMA, The Russell 2000s cleared the 200 DMA, and the S&P 500closed on new highs!
Of course the week ended well on light volume, so it does beg the question on whether the market went up on fumes or is this the proof of the allegory “The Boy Who Cried Wolf” where the sheep are dead because the adults failed to show up to protect them? In other words, were most bulls on vacation and the rally for real?
The strength began where it needed to: GOOG NFLX TRIP AMZN TSLA, etc.-the ones so beat up during the early part of the year. The leading groups have been Transportation, Energy, Real Estate and Semiconductors. Except for Transportation, those moves were relatively muted at the end of last week.
The laggards remain Retail, Homebuilders (good boost on Friday) Financials, andBiotechnology. Two logical conclusions, if logic is something to be counted on.
One: The market brings back the more confident buyers and we see S&P 500 at 220 during a rare summer run. Furthermore, Rotation, rotation rotation-the big guns digest and the other sectors play catch up.
Two: Last week was a sucker’s play and since not all sectors participated, the NASDAQ stocks turn down on Tuesday or worse, gap down and head south viciously hurting those who built up a long portfolio in the big names and did not take profits.
For consistency’s sake I end with a comment on rates. Not much changed as far as confirming or invalidating a potential bottom in rates. In fact, the action Friday was rather milquetoast. Relative to last week’s rally, the classic relationship should have been for rates to firm. That’s where logic turns to inanity. That where a protective and diverse portfolio continues to dictate our trading for now.
S&P 500 (SPY) New high close which of course is sexy and compelling
Russell 2000 (IWM) What a relief to see this clear and hold over the 200 DMA plus, close well. Best case for a continuation rather than a contrarian point of view
Dow (DIA) 166 next point to clear
Nasdaq (QQQ) Good news-great follow through-the case for digestion and perhaps a mellow correction-now a bit overbought. 88.35-60 now support
XLF (Financials) Unconfirmed phase change to bullish. Good thing
SMH (Semiconductors) Looks a lot better with 45.50 some resistance ad 45.00 support
IYT (Transportation) Another new high close and not overbought
IBB (Biotechnology) Confirmed the phase change to bullish and a muted inside day-big eyes here
XRT (Retail) Continues to be troublesome unless here is where we say a major catch up move this week
IYR (Real Estate) Good housing numbers and this is back in the game
ITB (US Home Construction) Basing if holds 23.75
GLD still just chopping around sideways near all the moving averages so keep looking
USO (US Oil Fund) New 2014 highs
OIH (Oil Services) Inside day
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Closed red on the week but up from the lows of the week
UUP (Dollar Bull) Bottoming action still in play with 21.50 the elusive resistance which it touched but did not clear
KRE (Regional Banks) A real underperformer
FXI (China Large Cap Fund) Interesting spot right under the 200 DMA
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