"Money for Nothing." I Want My M(arket) TVs!

June 5, 2016

Mish's Daily

By Mish Schneider

mdaily20160605

Meow Wolf Santa Fe, NM

I love this part of the exhibit at Meow Wolf. With no real discernable picture on any of the screens, static is the point. The screens change images every few seconds. You might see a talking head, but only for a moment at a time. You can barely make out a face nor comprehend a voice.

The number of screens that constantly change perfectly exemplify the fluctuating and varying perceptions of the market. It illustrates the confusion one most likely experiences listening to all of the market commentators on TV.

Last week, the market rallied mainly because the Russell 2000, the market’s broadest index and the one that represents mainly American companies, took flight. Once Grandpa moves, smart investors (even ones who haven’t heard of my Modern Family, take notice.

Even with the smart money, the volume remained below average in IWM. The public, who heavily rely on the media to tell them what to think is going on in the economy and the markets, continue to be too focused on the Federal Reserve and interest rates. They hear doomsday reports after stats like the jobs report comes out showing only 38,000 jobs added.

Are there issues in the global and US economy? Of course. However, in case you haven’t noticed or have read my Daily this year, commodity prices are soaring. A big part of the Fed’s equation for raising rates is reaching an inflation index of 2%. As I have said over and over again- “be careful what you wish for” because inflation may not necessarily rise in a tidy fashion.

Trying to predict what the Fed will do and what they will focus on next is like watching those TV screens above.

Here’s what I see on my trading screens: Weakening Dollar, Low Interest Rates, Rising Commodity Prices and Firming Indices. What now?

All the members of the family held technical daily chart support levels. All worked off some overbought conditions on the daily relative strength indicators. Even Transportation (IYT) ultimately maintained a price over the 200 DMA.

Is the market high from lower rates? Maybe. However, let’s not forget the market climbed before the jobs report anticipating the FED will raise. So again, forget all of that.

Watch how the Family responds to increasing inflation. For now, greater demand for commodities is a welcome relief after fears of deflation dominated for so long.

Watch the Trannies since they and Biotechs are compadres in rallying all the while hanging onto their negative phases. Yes, the market tends to run 6 months ahead which could mean better economic news coming. It could also mean that the lack of volume and lagging Transportation sector means we should brace ourselves for a new gremlin-inflation fears.

S&P 500 (SPY) Still, April high 210.92 to clear. Has to hold 208.50

Russell 2000 (IWM) 118.45 overhead resistance. 115.00 major support then 113.95

Dow (DIA) 176.85 support, 178 pivotal 180 places to clear

Nasdaq (QQQ) 110.60-111 remains resistance. Has to hold 108

XLF (Financials) 23.50 pivotal. 24.00 next point to clear

KRE (Regional Banks) Tested and held the 200 DMA. Over 41.30 better again

SMH (Semiconductors) Filled the gap to 57.46 with 56.25 support

IYT (Transportation) Has 2 hurdles. The 50 DMA at 140.60 and the weekly MA at 140.10. Really needs to hold 138.50 area to keep in the game

IBB (Biotechnology) If holds 275 could see 290

XRT (Retail) Inside day. 41.75 is the support to hold. Resistance up to 44.75

IYR (Real Estate) Must clear 80.25 next

ITB (US Home Construction) If clears 28.00 should continue