Market’s Brown Earth Dog Gets a Manicure

July 9, 2018

Mish's Daily

By Mish Schneider

blankI use lots of dog images to help describe market conditions as this is the Chinese Year of the Brown Earth Dog.

In the past, I have shared many of the predictions for the stock market made by Asian Feng Shui Masters, who delve into these sort of things.

Some highlights:

The heavy earth element is expected to bring prosperity to wood industries and fire industries.  The earth element is a symbol of money to the wood industry, which includes fashion, media, paper, books, education and environmental industry.

The second-best industries could be fire. Fire industries are energy, finance, entertainment.

Earth industry faces strong competition in earth year.  Earth industries such as property, mining, and high tech are not very prosperous.

Also, the money to earth industry is water, which is totally absent. Metal industry such as banking, machinery, cars, are also unfavorable.

The Water industry, which is transport, communication, and shipping enters the grave in the Year of Dog, making the water industry not so profitable in 2018.

To sum up, the “experts” expect weakness in real estate (IYR), mining (XME), and tech (SMH). They expect transportation (IYT), communication (VZ, DISCA, CTL) and shipping (DRYS) not to fare well.

Yet, wood (WOOD), fashion (KORS, XRT), media (CBS), the environmental industry (NEE, FSLR) and entertainment (NFLX, WWE), should outperform.

Here, given the recent rally in the overall market, our Brown Earth Dog wants to spruce up by getting her nails polished.

But, is she painting them red or green?

Of the Modern Family Sectors, if the Brown Earth Dog is correct, Transportation, Banks and Semiconductors are setting up for a new short.

Tran (IYT) had a great day. The decision to short or stay the bullish course is easy to make.

Simply watch the phase. Currently, IYT trades below the 50 DMA. That makes 192.60 resistance, which if cannot clear, will provide us with a great risk point.

Banks (XLF KRE), are in a bearish phase. Seems the Brown Earth Dog has already had a big impact.

With bank stocks reporting earnings, 27.50-27.65 is the area to watch in XLF. Like with IYT, if begins to turn down, there is your risk area.

Semiconductors (SMH) closed in a marginal Bullish phase. It needs a second close above 105.50, which is now the swing point to look at for painting our nails green (above) or red (below.)

The predictions for the industries that will prosper have little to do with the Modern Family. Fashion, or Retail (XRT) is closest. That is in a bullish phase, again, consistent with the Brown Earth Dog.

The takeaway is that the Modern Family should not be discounted. If the market turns lower from here, I would watch IYT, XLF, KRE and SMH.

If they can improve in phases, go for green.

Even with the bullish indices, the story is in the core of the key economic sectors in the family.

S&P 500 (SPY) 274.49-pivotal. 278.06 fills a gap, so if it cannot clear that, could see sellers.

Russell 2000 (IWM) Getting close to the highs. Will it make it to new ones? Depends on if it can hold 167 at this point

Dow (DIA) Unconfirmed bullish phase. Makes 246.32 important pivotal support for this to confirm or not

Nasdaq (QQQ) Getting close to the highs. Will it make it to new ones? Depends on if it can hold 175.75 at this point

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