January 5, 2016
Mish's Daily
By Mish Schneider
The question raised on whether two essential members of the Modern Family resolve as a triple bottom or giant bear flag continues to resolve.
Whether Granny Retail (XRT) who has hobbled, limped, laid down and crawled back up again, holds 42 and clears 44.00 is one key component of not only the January Calendar Range but also for many other aspects of the market.
As Geoff has been posting, “January will often trend, and it can reveal new trends.” Considering the historical and statistical importance of how January begins, I am looking at Granny Retail and Big Bro Biotechnology specifically as their potentially contrarian technical patterns are simple to follow.
I purposely use the word “resolve” rather than “solve” when posing the question about Retail and Biotechnology.
Resolve has several meanings while solve has one.
To resolve something, you may deal with it conclusively. However, how you dealt with it may not be the most ideal way to have done so. Generally, you pick a way to resolve something, see it through and then deal with the outcome.
To solve something means you have found a solution to a problem. It implies you have dealt with it successfully, finding what was quite possibly the only way to succeed.
And that’s the rub. Trading the markets, we typically work to resolve our trading by picking an instrument, a direction, assessing risk and then dealing with the outcome.
But can we solve the question by finding the only way to succeed examining XRT and IBB?
IBB across 3 timeframes intrigues me most. On the daily chart, the phase is bearish. The bear flag has broken. There is some price support around 320.
On the weekly chart, once it closes under 335.75 this week (if it does) it fails the 65-week moving average. The more important 200-week MA sits way below. The ultimate test of a 4-year bull trend, is a drop and hold of 236. Ouch.
On the monthly chart, 308.50 is the 2 year moving average. Possible we see it fall to there there, bounce and then decline further thereafter. But wait, I am getting ahead of myself. We can let the January Calendar Range help us with that resolution or solution.
XRT traded just below (recovering quickly) the 42 level in August and November. January 4th, the low was 42.40, hence the possible triple bottoms. The phase is bearish. A move over 44.40 would take out the 50 DMA, change the phase and get us thinking bottom.
On the weekly chart, XRT is close to the 200-week MA at 40.46. If that puppy breaks, Granny’s got a whole new bag (and it ain’t from Neiman Marcus.)
On the monthly chart, since XRT broke down 4 months ago, a break of 40.46 takes it to 2014 lows 38.40 or lower.
As January progresses and we edge closer to the Year of the Monkey, keeping your trading decisions that simple reminds me of this adage: “Monkey see, Monkey do.”
S&P 500 (SPY) After Monday’s new 60+ day low, big volume, close on the highs-Tuesday it closed above the previous day high. At this point, the one-day reversal is confirmed. The doji candle indicates apprehension which is understandable
Russell 2000 (IWM) Inside day-talk about apprehension. 108 and 113 the key points that are closest.
Dow (DIA) Similarly to SPY, all the elements of the reversal confirmed. 174 big resistance
Nasdaq (QQQ) NASDAQ held the 200 DMA and confirmed the warning phase. However, it could not confirm the reversal the way SPY DIA did
XLF (Financials) This too confirmed the one-day reversal. Lots of resistance overhead at 23.85
KRE (Regional Banks) Inside day on the recent lows-not healthy looking unless it takes out 41.27 with conviction
SMH (Semiconductors) Best thing I can say is the double the average daily volume is noteworthy
IYT (Transportation) has to prove it can hold
IYR (Real Estate) After the comments on its potential inverted head and shoulder bottom, this cleared back to an unconfirmed bullish phase. Through 76 will help the rest of the market.
ITB (US Home Construction) Inside day under the key 26.50
GLD (Gold Trust) 102.25 pivotal. Over 104 better
GDX (Gold Miners) Over 15.00 worth a follow long
OIH (Oil Services) must hold 25.40 to remain a bottom
UNG (US NatGas Fund) All about the 50 DMA at 8.85
TAN (Guggenheim Solar Energy) Looking to add
TLT (iShares 20+ Year Treasuries) Seems that the rates will not ease any time soon
UUP (Dollar Bull) 25.80 pivotal
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