Market’s Weak and Idle Theme

August 1, 2018

Mish's Daily

By Mish Schneider


Puck, Santa Fe Shakespeare Society-A Midsummer’s Night Dream

“…And this weak and idle theme, No more yielding than a dream…”

A monologue by Puck, a clever yet mischievous fairy, is delivered to the audience at the end of Midsummer’s to apologize in case he might have offended them.

His offense? Mistakenly applying the wrong love potion to the fairy queen.

It reminds me of the strong performance by Apple (AAPL) today.

Like Puck, AAPL’s strong report was meant to put a love potion on the market.

Like Puck, that rally in AAPL did little to boost the more important economic indices and sectors.

Like Puck, some investors required an apology as, unless they bought AAPL, they might have gotten mistakenly long.

“A weak and idle theme, no more yielding than a dream.”

At the end of Midsummer’s, Puck asks the audience to “Give me your hands, if we be friends...”

How can the market make friends with investors again?

Let’s go with this theme:

“A consumer driven rally means more to me than a tech driven rally.”

Today, the Federal Reserve kept interest rates the same at 1.75-2.00%.

Powell used the word “strong” 3 times to describe the economy.

Friday, the unemployment number comes out.

Today, the private sector job growth boomed to increase from 185,000 to 219,000.

For consistency sake, let’s look at the 3 measures we examined yesterday, Retail (XRT), the Dollar (UUP) and interest rates (TLT).

And for extra fairy dust, let’s look at the Russell 2000 (IWM) and Transportation (IYT.)

XRT not only failed to clear 50.00, it broke the 50 DMA and went into an unconfirmed warning phase. Not so healthy after yesterday’s strong consumer confidence.

UUP cleared back over 25.00, meaning the dollar strengthened.

TLT’s dropped which means interest rates strengthened.

Put that all together, you have retail chains weakening. Although the dollar strengthened, at this rate, the cost of services and goods should rise. And certainly, borrowing money will cost more.

As far as IWM, it went back into an unconfirmed warning phase. But with an inside day (the range inside yesterday’s trading range), the warning phase and a further decline will have to confirm with a move under Tuesday’s low-164.07.

Transportation, in a bullish phase, also had an inside day.

That tells me that investors are worried about rates and the strong economy overheating. Yet, at the same time, supply and demand remain robust.

So, for now, bulls can be friends with Puck.

Nevertheless, remember that he is also clever trickster.

S&P 500 (SPY) Inside day. Means pause and uncertainty. Under 279 some trouble. Above 282 better.

Russell 2000 (IWM) Inside day. 166.20 the 50 DMA pivotal area. Under 164 trouble.

Dow (DIA) 252.00 support and has to clear 254.79 and then 255.68

Nasdaq (QQQ) 175.20 the 50 DMA and above 177.73 better

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