Market Trades Like a Bronco-Buster

December 4, 2018

Mish's Daily

By Mish Schneider

blankI found this record at a flea market.

It’s an antique that plays at 78 RPMs.

I thought that the red color and the placement in a cloth sleeve could be useful to describe the market someday.

And so it is.

I saw an interesting statistic today.

On February 8th, 2018, the Dow Jones had the biggest one day drop at 1,175.21 points.

Since then, there have been four more record drops including today’s when at one point, the Dow was down 800 points.

Since we are talking about bronco-busters, let’s look at Transportation.

Last night I wrote concerning the relationship between Transports and the Russell’s…” Watch for IWM (the Russell 2000) to catch up more, or stall and IYT (Transportation) to begin to slip. Until such time, I still look at this rally as a big one in a bear phase.”

How did that work out?

I went on to write, “If IWM does not clear 159.50, then I would expect IYT to begin to struggle. 193.94 its 50-WMA, is not too far away.”

As Tuesday began, IYT opened up above 193.94. IWM opened up around 154.

And it was all downhill from there.

Right on cue, IYT failed 193.94, dragging pretty much everything else down with it.

IYT closed the session back in an unconfirmed bearish phase.

IWM, already in a bearish phase, lived up to its phase. With an over 4% decline, it is now fairly close to the October 26th low of 144.70.

To help you further prepare, I also commented in the ETF section: “NASDAQ 1000 (QQQ) A Death cross with the price right at the moving averages. If history serves us well, should this fail 171.80 area and not get back over 172.50, could be a low risk short using QID.”

NASDAQ fell 3.8% with QID, the ultrashort, gaining more than 7.00%.

What happens now?

The interest rates eased more as folks flocked to what has been a safe-haven.

At the same time, the dollar eased, but not by enough to say with assuredity that the top is in.

If the dollar topples, we are back looking at the stagflation potential as we head into 2019.

For now, with tomorrow a day off, we have unknowns to factor in.

Will better headlines emerge out of the U.S. and China?

Will institutional buyers show up with a low risk to the recent swing lows?

Smartest advice I can give now is this-if you don’t know how to ride a wild bronco, best to keep youself from getting busted.

S&P 500 (SPY) Unconfirmed Distribution phase. 270 may offer support and if so, this has its work cut out for it to get back to 276. If it fails 270, 262.50 next big area of support.

Russell 2000 (IWM) As the weakest, the decline is also the strongest. 150.50 the best overhead resistance with 144.70 the next support

Dow (DIA) Unconfirmed Distribution phase. 250 the best support with 255 big resistance. If 250 fails looking at 242 next

Nasdaq (QQQ) 165 now some support. That QID trade worked great. 157.75 the best underlying support and back above 170 some relief

KRE (Regional Banks) Down nearly 5.5% today. Looking at 50 as support and 54.50 resistance

SMH (Semiconductors) Could not hold 97.00 and back into an unconfirmed Bearish phase.  Support now at 93.30 then 90.00

IYT (Transportation) 184 next support with a move back over 190 maybe a relief

IBB (Biotechnology)I always use this as the gauge for just how wrong the public can be-buy the highs sell the lows. Express train to Bearish phase with 104.75-105 the must hold support.

XRT (Retail) 45.00 pivotal support with 47.50 resistance

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