August 9, 2016
Mish's Daily
By Mish Schneider
Wading means “to walk in or through water or something else that similarly impedes normal movement.” Wading birds typically have long slender legs so they can keep their balance while they walk through mud. The have long bills so they can forage efficiently. They have agile necks so they can change posture often.
As we sit through summer doldrums, only at the unique point of all-time highs in the market, we wade. While wading, we need long legs or well established long positions and balanced portfolios.
Like birds foraging for food in shallow waters, we must employ our long bills efficiently. While foraging, we need our agile necks to change positions frequently.
Trading the market right now is like wading through water that impedes normal movement. Wading birds are patient. They may stand motionless for long periods of time. If they feel threatened, they freeze. If they feel threatened enough, they will take flight.
Patient traders are trying hard to remain as motionless as wading birds while they forage for new positions. But I wonder. For how long can traders freeze from trading? For how long can they go without food before they feel threatened enough to take flight?
Last night I featured the monthly chart on the 20+ Year Long Bonds or TLT. My purpose was to try to gauge whether or not the longer term end is near. I highlighted a channel that goes back 8 years.
In the quest for determining whether or not the TLTs have set a trap for the Bulls, today’s action gave us no definitive conclusion. Although the price rose, the TLTs remain under the channel trend line.
Trying to keep an agile neck so I might stay flexible, today’s action suggests that hunger for bonds remains. The market may just be too vulnerable for anything other than keeping rates status quo.
At the risk of writing similar thoughts over and over thereby wading in circles, if rates remain near zero, equities can go higher. But so can commodities. I cannot help revisit the stagflation theory I explored on July 29th.
“With interest rates falling further, metals rising higher, Nasdaq trading at all-time highs…and disappointing GDP for the second quarter…”
If we look at where the market is today, I see more of the same. Monetary expansion by the Federal Reserve persists. Gold consolidates over the 200 week moving average. New economic data continues to support a lack of economic growth.
The market is holding near the highs but duck waders like me are getting restless. Or maybe, this is what the August looks like…a great time to wade in muddy water but also a good time for duck hunters to get their waders on too.
S&P 500 (SPY) Another quiet day. Some in the camp of quiet-stay in direction of trend. Others, more concerned
Russell 2000 (IWM) Inside day. 123.53 the last high before last August’s crash. 121.15 now the 10 DMA support
Dow (DIA) 186.08 the 2016 high. 184.25 pivotal support
Nasdaq (QQQ) New all-time high. Maybe a repeat of last year.
XLF (Financials) Inside day. January high of 24.27. 23.70 area is now pivotal support
KRE (Regional Banks) Very far from the 2016 high of 43.00.
SMH (Semiconductors) Looks like NASDAQ only better since this was first.
IYT (Transportation) Inside day but not in a good way. Keep watching the Family-these MUST catch up to see a growing economy for real
IBB (Biotechnology) Time to watch the 10 DMA (293.30) which it hasn’t been below since end of June
XRT (Retail) The biggest supporters of stagflation theory are this and Transportation. The US economy indicators.
IYR (Real Estate) It’s still working off a reversal pattern unless it clears recent highs
GLD (Gold Trust) The longer this holds up here, the better I like it
SLV (Silver) If closes this week over 19, third time a charm
GDX (Gold Miners) I know this is not finished going up yet
USO (US Oil Fund) Sputtered today. I find oil uninteresting until it clears a weekly trend
XOP (Oil and Gas Exploration) 34.90 support should hold if good
TAN (Guggenheim Solar Energy) They killed Sun Power after earnings. Here we go again
TLT (iShares 20+ Year Treasuries) Will see if this can get through 140
UUP (Dollar Bull) 24.75-25.05 range to break
Every day you'll be prepared to trade with:
