Market’s Fight or Flight

December 13, 2017

Mish's Daily

By Mish Schneider

blankPeaceful seagulls will either peck at each other or take flight when they sense danger lurking.

Their sense of danger however, is relative.

I took this photo after I gingerly walked within 20 feet of where they were sunbathing. Chaos ensued.

Several issues in the market have peaceful bulls sensing danger. To name a few:

The upset in Alabama and how that will impact the tax reform vote.

The Federal Reserve raised the interest rates by .25%.

Consumer price inflation barely gaining traction.

4.7 million Students defaulting on their loans.  Taxpayers cover unpaid loans.

The renewed upheaval on sexual allegations towards Trump.

Bullish sentiment at pre-2001 levels.

And of course, Russia, North Korea and Brexit.

Today, like seagulls, the market flew up to make new highs, while several instruments fought for crowded air space.

Will the market fight to stay strong or fly even higher?

Chaos is a word we have not used to describe market conditions since the stunning sell-off followed by the stunning reversal right after the Presidential election.

Interesting that the Modern Family remains mixed.

Biotechnology went into an unconfirmed bullish phase. Not only does that need to confirm, but the slope on the 50-DMA is negative.

Semiconductors, seemingly tired after many flights this year to new highs, is in a warning phase.

Regional Banks, although a sector that should celebrate today’s rate rise, instead closed red.

Transportation (IYT), on the other hand, finds optimism on a potential infrastructure plan, and looks ripe to continue rallying.

Meanwhile, the Russell 2000 (IWM) hovers below 152.

Through 153, IWM has a chance of tackling the highs after a reversal pattern sent it down to test the 50-DMA.

However, should IWM fail to hold 152, the 50-DMA sits dangerously close (like me to the seagulls), to current price levels.

Seagulls panic easily, but only for a brief period. Within seconds, they fly back to the shoreline to continue sunbathing.

Unless a tsunami hits.

S&P 500 (SPY) 265 pivotal.

Russell 2000 (IWM) 149.50 the 50-DMA 152 pivotal and through 153 better

Dow (DIA) 243.40 the 10 DMA support below

Nasdaq (QQQ) 154.50 the 50-DMA support below

KRE (Regional Banks) 57.00 major support to hold

SMH (Semiconductors) 96.60 level so key

IYT (Transportation) 189.68 recent highs. But if fails 186.35 expect to see around 181.50 again

IBB (Biotechnology) Through 107.50 see 110 at least. But under 105 caution

XRT (Retail) 44.05 the support to hold

IYR (Real Estate) I got eyes here for the longer term

GLD (Gold Trust) Held critical support-maybe bottomed as per the strong reversal candle.

SLV (Silver) Silver outperformed gold which is generally a good sign for the metals.

GDX (Gold Miners) Confirmed reversal bottom

XME (S&P Metals and Mining) I have been writing to buy this since 32.00

USO (US Oil Fund) 11.00 support

TAN (Solar Energy) 23.30 best support

TLT (iShares 20+ Year Treasuries) 127.70 key resistance

UUP (Dollar Bull) Back to unconfirmed Bearish phase

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