Market’s Split Personality

January 19, 2017

Mish's Daily

By Mish Schneider

mdaily20170120According to the Cambridge Dictionary, a split personality is one who behaves so differently at different times that he/she seems to have more than one character.

There is a test one can take to help diagnose whether one might possess several to many traits that negatively affect one’s life.

In recent months, I have written repeatedly about the discordance among the members of the Modern Family and how that might manifest in the overall macro picture.

If we consider the Family as one collective being, these test questions should help us determine if the Family has dysfunctional traits that could negatively affect the market’s life.

I took the liberty to anoint myself as the Family’s representative and answer some of the test questions for them.

Three of the more applicable questions:

Do you have difficulty trusting people?

Do you often see things in black and white terms? In other words, something either is or it isn't, with no gray area in between.

Do you often get stuck on the details while missing the larger picture?

Do you have difficulty trusting people?

In the case of Transportation (IYT), no. Even with today’s market decline, Trans closed green. Improved infrastructure and movement of goods, especially by rail, trust a more roseate future.

Semiconductors say maybe. Confident that technology will continue to shine as a sector, SMH trusts (and hopes) it can hold up the market.

Retail, Biotechnology and the Russell 2000 say yes. Retail and Biotech have already deteriorated in phase to Distribution and Bearish respectively.

The Russell 2000 tested and held the 50 DMA yet closed far weaker than the other 3 indices. Maintaining that the U.S. economy can endure its strength-a definite trust issue.

Do you often see things in black and white terms? In other words, something either is or it isn't, with no gray area in between.

Answering collectively, yes! Seems that the sectors are either in it to win it or determined to cause damage.

Although one could argue that the recent trading range in many instruments is the gray area, for the most part, the positive sectors are all bullish while the destructive ones are all negative.

Do you often get stuck on the details while missing the larger picture?

If answering as the Family collectively, yes. Retail is stuck on the decline of “brick and mortar.” Biotechnology is stuck on the political rhetoric of eliminating price gouging.

Transportation is stuck on expanding supply and demand for its basket of companies. Semiconductors are stuck on global growth.

The Russell 2000 is just stuck, period.

Hence, an existential question-is the whole equal to the sum of its parts? Or, as Gestalt Therapy suggests, is the whole other than the sum of its parts?

The market and its participants appear yet to figure out if they should focus on the details. If so, which details? Or, should they focus on the whole picture?

S&P 500 (SPY) 226.00 pivotal support, then 224.50 and above 228.34 the high.

Russell 2000 (IWM) 135.50-136 Resistance. 133.59 pivotal support.

Dow (DIA) 197.50 pivotal support.  IBM should help.

Nasdaq (QQQ) 122.50 support to hold

KRE (Regional Banks) 53.72 to defend

SMH (Semiconductors) 72.60 pivotal area. 74.00 resistance to clear.

IYT (Transportation) 166 pivotal area with support at 164

IBB (Biotechnology) Unconfirmed bearish phase Tuesday, unconfirmed accumulation phase Wednesday, unconfirmed Bearish phase Thursday-split personality?

XRT (Retail) 43.90 pivotal resistance

IYR (Real Estate) If this breaks a trendline around 75.75 that would not be good and over 78 much better

GLD (Gold Trust) Held the 10 DMA at 113.73

SLV (Silver) 16.00 pivotal support 16.50 resistance

GDX (Gold Miners) 23.00 pivotal area.

USO (US Oil Fund) 12.00 is big resistance and 10.80 big support

TAN (Solar Energy) 18.00 key

TLT (iShares 20+ Year Treasuries) 120.25-119.50 is the support this rally took off from. If holds has legs, if not, expect to see TBTs hold 40.00

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