November 30, 2016
By Mish Schneider
As per the last several Daily’s, I’ve noted the parameters of several monthly channel lines of resistance that had to clear or fail to elucidate next direction.
The TLT (20+ Year Long Treasury Bonds) had to hold 118.55-119. The Russell 2000 (IWM), if failed to close above 134, could turn the recent rally into flying monkeys.
The two most vulnerable Modern Family members, Granny Retail (XRT), had to hold above 45.50 while Biotechnology (IBB) needed to defend 278.
Additionally, Transportation’s (IYT) big swing area sits at the 160 level. Regional Banks (KRE) at 48.50 and Semiconductors (SMH) at 71.72.
So, does it come as any surprise that the last day of November, like the drawing above, the market has no eyes behind the glasses and X’s for eyes on its tie?
With December on tap, a few uncertain outcomes loom before us.
Will the Federal Reserve go ahead with the assumed December hike? Will Italy pass or reject the referendum cutting their Parliament down considerably while giving the power to Renzi?
What we cannot see:
Will confidence in the next U.S. administration increase or diminish?
Clearly, the diversion among the sectors and the monthly channel points suggest anxiety and confusion.
We begin this month with TLTs holding the key support. If that sustains, it could mean either the rate hike has been discounted or bond traders expect no hike.
With the Russell 2000 failing to clear the resistance or top of its channel, it could mean move over and a big correction to 126 is nigh. Or, it could mean pause until the next minor hurdle-the unemployment report comes out Friday morning.
With Retail and Biotechnology weak, it could be strong warning that the rest of the market is bloated. Or, it could mean that the new administration will focus more on banking and infrastructure.
That would certainly explain why Regional Banks and Transportation are trading in their own bubble.
However, bubbles do not float indefinitely before they pop. The market will need to see consumers spending money, especially given the holiday season.
Furthermore, speculators must be willing to put up their sidelined cash and buy the heaviest speculated sector, Biotechnology. Otherwise, the well could run dry.
Today’s big story, the OPEC news helped energy and oil with gains from 8-12% depending where you looked. Yet, with the strong dollar, weak agricultural and metal prices, some alignment among commodities would be helpful for future forecasting.
With one month left in 2016, it might be too much to ask for clarity on how much of the market action is based on perception over reality.
Time and patience will provide those answers. After all, this month, most investors close their books while the overall market volume slacks off.
This Chinese Year of the Monkey, known for both fabulous and panic-laden surprises, will be replaced in 2017 by the confident Rooster. More on that early next year. In the meantime, cock-a-doodle-doo.
S&P 500 (SPY) Unless this clears 221.83, could see 218 again if fails 220.
Russell 2000 (IWM) 131.70 the fast-moving average failed. Could mean a correction to 126 is in store unless this retakes 134.
Dow (DIA) Could be a possible blow off top. 190 pivotal
Nasdaq (QQQ) Closed in an unconfirmed warning phase. 117.59 pivotal for confirmation
KRE (Regional Banks) New 2016 highs intraday. Yet, if this gaps lower beware
SMH (Semiconductors) Inside day. An open under 70.96 could bring more weakness.
IYT (Transportation) 160.50 is key. If holds great. If not, could be another reversal sign
IBB (Biotechnology) 273.95 the 200 DMA to hold.
XRT (Retail) 45.50 the monthly support to defend. If not could see a move down to 42.00
GLD (Gold Trust) 110 bear flag target
GDX (Gold Miners) Still like the potential bottoming pattern against 20.00
USO (US Oil Fund) 10.45 area now key to hold
TLT (iShares 20+ Year Treasuries) If the channel does what it could, it will fail the bottom, trap the bears and then head right back above for a rally. If.
UUP (Dollar Bull) Landed on 26.25. But also into Bollinger Band resistance
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