September 18, 2016
By Mish Schneider
Rubber Rabbitbrush, also known in these parts as Chamisa, flowers each fall into these dense clusters of bright-yellow. As beautiful as Chamisa is to look at, the pollen infamously causes an annoying allergic reaction in some people.
With the market trying really hard to look beautiful and blossom, the recent revival of volatility this fall has released its share of pollen that similarly causes annoying allergic reactions in both bulls and bears.
That little silhouette in the bottom right corner is me trying to get close enough to take a picture without developing a headache and runny nose. That’s exactly how trading felt last week!
Certain instruments flowered. Biotechnology, a major focus of last week’s commentary, cleared a critical resistance level. Beginning last Monday with a bullish engulfing pattern, in spite of the volatility, that simple technical pattern gave IBB dense clusters of bright-green!
Retail (XRT), on the other hand, if you got too close, left you sneezing and reaching for medicine.
Where does that leave traders this week who are seeking profits whilst avoiding runny eyes?
The FANG (Facebook, Amazon, Netflix and Google) stocks within NASDAQ all closed out the week near the highs of the Friday prior. You remember that Friday? The market went in one direction-down. Allergies flared. Bulls began that weekend feeling nasal and congested.
This weekend though, those same bulls popped Allergan and got relief. With clearer noses and drier eyes, Amazon as a prime example, will get traders out and about smelling the Chamisa symptom-free if it rises above that Friday high of $781.00.
To sustain a rally though, we need the Modern Family to participate. Sister Semiconductors began last Friday on new highs. With volatility of her own, SMH proceeded to sell off quickly. Ultimately, SMH avoided closing on the lows. Monday’s trading range will be noteworthy.
The Russell 2000 (IWM) confirmed the return to a bullish phase ending the week back over the 50 daily moving average. A clutch save by Gramps.
Bullish allergy sufferers want to see IWM begin and remain strong on Monday. As Friday’s trading range was also inside the range of last Thursday, a move over 122.20 will bring out the nature lovers without experiencing the headache.
I caution you bulls though. Do not stuff the Allergan in the back of your medicine cabinet just yet. Warning signs prevail in not only Granny Retail (her medicine chest is always full), but also in Transportation and in Regional Banks.
With all three sectors sitting dangerously close to support, it will require a fair amount of knowledge in botany for allergy-prone traders to determine which flowers to sniff and which ones to avoid.
S&P 500 (SPY) 212.00 critical support to hold with a move over 216 better
Russell 2000 (IWM) Confirmed the bullish phase with an inside day.
Dow (DIA) Inside day a bit too close for comfort near the terror at 180 level
Nasdaq (QQQ) 118.12 the high to clear. 116.50 now the place to hold
XLF (Financials) Closed below the 50 DMA for an unconfirmed warning phase-weak
KRE (Regional Banks) 41.06 the 50 DMA to defend
SMH (Semiconductors) 65.75 now pivotal support
IYT (Transportation) Weak inside day closing right at the 140 pivotal area
IBB (Biotechnology) Big bro saves the day. 290 support
XRT (Retail) Inside day and uncomfortably close to breaking down under 43.25
IYR (Real Estate) Doing nothing but languishing at last week’s lows
ITB (US Home Construction) Looks headed for 26.85
GLD (Gold Trust) Holding support levels and if can close back over 126 area looks great
USO (US Oil Fund) Uninteresting until it clears the weekly moving average
XOP (Oil and Gas Exploration) Like the turnaround off the 50 DMA
TLT (iShares 20+ Year Treasuries) Will be harder to predict this week with the Fed meeting
UUP (Dollar Bull) Some good economic stats hence the stronger dollar
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