January 21, 2016
Mish's Daily
By Mish Schneider
Was today’s action “Journey of the Sorcerer” or the “Best of My Love”?
Not only has my Modern Family been hit with a weak stock market environment, they’ve also lost not one but two music icons.
After the sad and way too early demise (there’s that word “too” again) of David Bowie, this week the rock and roll world lost Glenn Frey of the Eagles. He was only 67 years old.
“Desperado”, the Eagles hit from 1973, came to mind early Thursday after China’s Central Bank pumped hundreds of billions of yuan into the country’s financial system and then Draghi set the euro up for expanded monetary stimulus for the 3rd time in a year.
Last night I spelled out my own trading plan regarding two rules I follow to assess how strong or weak a rally in a bear market is. Furthermore, I use these rules to decide if there’s any merit to a possible market bottom.
The market began the session off to a great start. One might even say the bulls traded in hopes that the Dow could sing “Take It to The Limit!”
However, did the Modern Family chime in with “Lyin Eyes”, “Witchy Woman”, or a “Peaceful Easy Feeling?”
Last night I wrote that, “If we look at the Russell 2000-my go to index- the January 10-day Calendar Range low is 97.51. Tuesday’s high was 101.20, which it could not clear on Wednesday.
However, for Thursday, if IWM is above 97.51 and clears Wednesday’s high of 100.32, then we have a decent risk either to Wednesday’s low, 95.06 or the JCRL depending upon the type of trade-day, miniswing or swing position.”
Thursday, IWM held the JCRL. It even for a time, cleared Wednesday’s high of 100.32. However, it could not close above so best we can say is short covering and if you went home long for a swing careful there is no “Heartache Tonight.”
What about the rest of the Modern Family?
Granny Retail did better. With 38.65 the JCRL. 39.70 Wednesday’s high to clear high, XRT could be ok. How she opens Friday will be even a better confirmation given Gramps’ issues.
Prodigal Son Regional Banks (KRE) did not do well at all. It closed under 35.81, its JCRL.
Big Bro Biotechnology IBB is well above its JCRL. However, it could not clear or close above Wednesdays high making it indecisive (with an inside day to boot.)
Transportation (IYT), like Granny Retail, nearly met both criteria of the 2 rules almost closing above Wednesday’s high but by end of day closing just shy of those highs. Plus, it held its JCRL.
Finally, Semiconductors (SMH) did the best of the bunch faring percentage wise better than Retail did.
Half the Family is singing “The Long Run.” The other half hums “Try and Love Again.”
Bottom line, with a family divided, we must turn to other relatives to weigh in. China (FXI) could not fill a gap to 30.23 nor close above 30. Solar (TAN) has had under the average daily volume so not really offering any clarity right here.
Cousin Oil (USO) hasn’t cleared $30.00 a barrel. Uncle TLTs (long Treasury bonds) fell from the resistance level offering the best hope as folks took profits from their flight to safety.
Maybe “No More Cloudy Days.” Maybe “Already Gone.” In either case, until the Family reconciles better, it’s another “Tequila Sunrise” for traders.
S&P 500 (SPY) January Calendar range low (JCRL) 185.52. With SPY’s inability to clear 187.49 Wed. high, that level has to hold
Dow (DIA) 158.23 the JCRL. 157.35 the 200-week moving average Could not clear 158.88 on a closing basis
Nasdaq (QQQ) Perhaps even more important than the Modern Family and its relatives, QQQs held 99.51 the JCRL. However, it failed to close above 101.83, Wed.’s high
XLF (Financials) Failing to hold 21.13 the JRCL, we now look to 20.53 Wed.’s low
SMH (Semiconductors) 47.59 pivotal
IYT (Transportation) JRCL 117.67 now a must to hold. 120.32 needs to clear again early if good.
IBB (Biotechnology) Had an inside day. 289.90 to clear with risk to JCRL at 273.06
XRT (Retail) 38.65 JCRL must now hold and needs an early push and hold over 39.70
IYR (Real Estate) A close this week under 69.81 breaks the 200 week moving average
GLD (Gold Trust) Has to clear 106.09 now to continue, then 106.24 the high this month.
SLV (Silver) confirmed recovery phase.
USO (US Oil Fund) A good high volume start to see if this has made a bottom.
XOP (Oil and Gas Exploration) If holds 23.41 the JCRL then I like the potential here best in this group
UNG (US NatGas Fund) 7.65 is a good level to watch hold
TAN (Guggenheim Solar Energy) Closed Over 23.33 but with little volume conviction so still watching
TLT (iShares 20+ Year Treasuries) Looks toppy which is the best sign of all. Let’s see if gets back over 127.30 or if it holds 124.45
UUP (Dollar Bull) Holding the 50 DMA
FXI (China Large Cap Fund) Would have preferred to see it close over 30.00. However, if it gaps over 30.32 that would be interesting
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