February 5, 2018
By Mish Schneider
On January 23rd, I wrote the following:” What I discovered today, will unequivocally help you determine if not the top of the market, at least a major inflection point for a correction.”
It all started with SPY breaking a 20 day streak by closing below a simple floor trader pivot called S1.
From there, we worked on the thought of a correction rather than the Days of the Dead that ensued.
With the Dow Jones Industrial Average back below 25,000, our Modern Family has huddled around the window of the plane, looking as white as skeletons.
Last Friday, Granddad Russell 2000 (IWM) went into a warning phase, now confirmed.
Granny Retail (XRT)Russell’s spouse did as well. She also confirmed the warning.
Today, IWM and XRT were joined by the S&P 500, NASDAQ, the Dow, Transportation, Regional Banks, and Semiconducutors, all in unconfirmed warning phases.
That means Tuesday, if no super significant bounce takes hold, they will all confirm that warning.
With the percipitous plunge, it seems highly unlikely we will see the return of the bullish phases in the immediate future.
The bigget issue-on top of all the other big issues -is that in just 3 trading days, the S&P 500 broke a weekly moving average it has held since November 2016.
That number comes in at 267.40.
Same applies to many other instruments as well. Semiconductors weekly MA comes in at 100.27.
Nevertheless, the week is young. Should buyers appear bringing SPY and SMH back above the weekly MA’s by Friday, then this could be the buying opportunity many are waiting for.
So, without going over the gory details, let’s look forward.
The rates, that many think of as the culprit for the sell-off, eased by end of day as folks ran into bonds or a “flight to quality”.
In fact, the dollar gained, reversing the higher rates-lower dollar scenario that has occurred for weeks now.
The Fed has a conundrum. Lower rates and spark inflation. Do nothing and deal with a huge balance sheet. Raise rates and put more pressure on the market.
Here’s what I am watching besides the dollar and TLTs.
The metals-particularly the gold miners, are a focus. Although Gold and Silver held up, they hardly acted like hedges for those running to safety.
Therefore, the miners could be key. Should GDX close back over 23.00, I imagine gold will clear 127.50 and Silver (with an inside trading day), will clear 16.02.
The agricultural commodities are another focus. Corn, Soybeans, Wheat and Sugar have all floundered since 2014.
Looking at DBA, the ETF, it is sitting in a Recovery Phase and barely budged today. Therefore, a close over 19.00 looks like a good buy signal.
Does this market action leave the Modern Family readying for burial or resurrection?
S&P 500 (SPY) I’m going out on a limb to say that 254-56 is the place to start buying again.
Russell 2000 (IWM) Here it’s 145.
Dow (DIA) 230-231 should hold. As with all the indices, a bounce could last a few days. That’s different than a bottom. Will look for more clues in the days ahead
Nasdaq (QQQ) Believe it or not, this still is the leader as it landed right on that key weekly moving average. Under 158, never mind. Through 161, way better.
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