February 11, 2019
By Mish Schneider
It was a choppy session today, which given where the indices sit on the both the Daily and Weekly charts, makes sense.
Choppiness also makes sense, given the potential government shutdown and the vague details on the progress of the China-U.S. Tariff discussions.
Today was a good day to have all your tools around you, but not act on using them to build anything new in your portfolio.
Rather, today was a good day to sit back amongst the clutter and take a little snooze.
Meanwhile, the U.S. Dollar continued its gains, while the interest rates remained relatively flat.
The Economic Modern Family vis a vis Transportation IYT, gave the bulls solace.
Actually, all the Economic Modern Family held up well.
Because of the dollar’s strength, the big losers were commodities.
Are commodities too cheap relative to equities?
With the dollar at new 2019 highs, that is good news and bad news for the market.
The good news is that the dollar buys more for Americans.
The bad news is that it hurts U.S. exports and therefore U.S. production and employment. It also makes the United States a less affordable travel destination for foreign visitors.
On the other hand, it encourages Americans to travel abroad, looking for good deals. Baby Boomers are booking trips 9% more than they did a year ago.
Circling back to commodities, the strong dollar has a negative influence on demand.
However, individual commodities can also have fundamental supply and demand characteristics, so they might move one way or another at times regardless of the direction of U.S. currency.
And that brings us back to tariffs.
A new round of Chinese economic data has pointed towards more weakness. Furthermore, if the U.S. and China fail to break their trade deadlock by the March 1 deadline, a new wave of tariffs will automatically kick in, heightening the risk to the global economy.
This is what happened during the Great Depression, following protectionist practices.
The domino effect on lower commodity prices is deflation, which in turn, is bad for global economies and for our farmers in the U.S.
But the bigger point is this.
Given the uncertainty, taking a snooze on adding risk is a good idea.
With the Modern Family’s strong performance today, it looks as though they are counting on a better U.S. Economy. Nevertheless, I have also seen them quickly run for the hills.
The charts are a perfect reflection of this, with prices smack dab in the middle between hope and despair.
S&P 500 (SPY) Held 269 to keep the bulls in the game. Under 266.24 will embolden the bears. A close over 272.58 will excite the bulls.
Russell 2000 (IWM) A move under 147.95 not so healthy. Above 152.40 a miracle. In between, I’d use 150 as pivotal.
Dow (DIA) Held 248.96 to keep the bulls in the game. Under 246.47 will embolden the bears. A close over 254.35 will excite the bulls as we are above the 200-DMA but working a reversal topping pattern.
Nasdaq (QQQ) Held 166.68 to keep the bulls in the game. Under 165.29 will embolden the bears. A close over 170.14 will excite the bulls.
KRE (Regional Banks) Looking at 53.18 to hold if good and 55 the next viable resistance
SMH (Semiconductors) 101 key resistance and 97.24 the key underlying support
IYT (Transportation) Cleared 185.37 the weekly resistance intraday. It’s only Monday. The Daily chart shows 184 as near-term support and over 185.37, 189.65 the next bigger resistance point.
IBB (Biotechnology) 109.92 the 50-WMA resistance. 107 the weekly support held.
XRT (Retail) 44.66 pivotal for the week. 43.50 the must hold spot
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