March 23, 2016
Mish's Daily
By Mish Schneider
Here Comes Peter Cottontail
Only, how does the bunny trail look? Depends on which bunny and what trail. Considering the Easter Bunny brings goodies to every boy and girl who are doing the things they should, is the Modern Family doing what it should?
A Bunny, a Bull or a Bear?
To me, the metaphor is simple. A family united is a force to be reckoned with. A family divided against itself cracks.
I’ve made no secret about how basically uninvolved I have been during the last leg of the recent rally in equities. After expecting the initial run off the lows back in February once Transportation (my Trannie sib) gained momentum, I dutifully watched to see how the rest of the family might follow in kind.
When everyone (IWM, XRT, SMH, KRE, IBB, IYT) works together, the confidence to trade more often with bigger position sizing ensues. When divergence rules the roost, confidence wanes and the trading strategy becomes more defensive.
Although many of the commodities retreated Wednesday as well, the major difference is that those commodities started to look a bit rich after coming off of major bases following their long declines. I see the sell-off as profit taking by the late-comers to that party.
Equities have had a long run and indeed, profit taking is a factor. However, especially given how my Granddaddy Russell 2000 (IWM) began this year, I’ve been viewing this run as more of a “bear market” rally. I see the inevitability of a correction to continue.
IWM, Biotechnology (IBB) and Regional Banks (KRE) have lagged behind Semiconductors (SMH), Retail (XRT) and Transportation.
Bulls had and may still have reasons to believe that Sister Semis will lead the market higher. SMH is in an Accumulation Phase.
Trannies, closer to their 200 DMA, align with Semis in an Accumulation Phase. Simply put, if they both hold the 200 DMA, Bulls get a pass.
Granny Retail (XRT) is torn. Does she follow Granddad or her favorite son IYT? XRT broke under the 200 DMA. Not enough to definitively determine whether the run is over, but certainly merits attention.
IWM dropped below the 100 DMA after retracing to where the whole mess began-110, or where it failed from back in December. That has to make Granny worry.
Big Bro Biotech from a technical standpoint, has made itself quite clear. After trying hard to pierce the 50 DMA and unable to do so, that stubborn bearish phase continues. Peter Cottontail with bear claws.
Regional Banks faring a bit better than its big bro, has underperformed not only Granddad, but pretty much the rest of the family as well.
With one more session before a long weekend, have fun with your human family for Easter; but don’t forget to mind the Modern Family.
Peter Cottontail may look all passive and cuddly, but he frightens easily if held too tight.
S&P 500 (SPY) 201.82 the 200 DMA. 204 remains pivotal
Russell 2000 (IWM) 105 support and back at looking for 108.65 to clear if good
Dow (DIA) 175 pivotal with 173.80 some support. Better at 171.25 the 200 DMA
Nasdaq (QQQ) 108 resistance and 106 support
Volatility Index (VIX) Not convinced enough with the low volume and average range that this was the reversal.
XLF (Financials) 22.50 pivotal area
KRE (Regional Banks) 36.75 support.
SMH (Semiconductors) Low volume so not exactly a strong reversal at this point
IYT (Transportation) Big eyes here to see if can hold the 200 DMA at 140.70
IBB (Biotechnology) 265 clears the 50 DMA. Otherwise, 250 next support area
XRT (Retail) Broke the 200 DMA. 45.50 level resistance with 44.35 next support
IYR (Real Estate) Back under 75.78 the JCRH
ITB (US Home Construction) 25.80 support
GLD (Gold Trust) Support down to 114. I still think this is a good correction as the space was getting crowded.
SLV (Silver) Golden Cross today which makes 14.20 good support area. Back over 15 would be impressive
GDX (Gold Miners) 17.00 to 17.30 should hold on this correction
USO (US Oil Fund) 9.88 level support. The range so far this week is inside the range of last week. Could mean consolidating but would watch to see which way that range breaks before getting too involved
XLE (Energy) Low volume correction with support around 61.00
XOP (Oil and Gas Exploration) If drops to 28 would be an interesting place to look at going long
TAN (Guggenheim Solar Energy) 21.50 would be an interesting spot to hold
TLT (iShares 20+ Year Treasuries) Back to an unconfirmed Bullish phase. 130 resistance
UUP (Dollar Bull) May not clear 24.98. If it breaks under 24.88 could be a low risk short
EEM (Emerging Markets) If holds 33 still in good shape
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