April 1, 2017
By Mish Schneider
My Red Land.
One painting depicts many characteristics of the Southwest.
If we were to draw a representation of the market’s complex characteristics, we would similarly see a red and green land.
Investors, like the market’s Natives, comprise of those who have survived this recent rally keeping their culture intact, and those who have continually been brutalized by shorting the rally.
The technicals, like the Mexican cross, depict the varying inflection points of both equities and commodities charts.
Erosion, like how the thumbs formed on the mountains, illustrate the diminshing market participation.
Monetary Policy, like the Navajo blankets, highlights the complications of designing an appropriate interest rate philosphy.
Given the distinct red and green landscape, how would an artist paint such a rich and multifaceted market?
Adding to the market’s dichotemy, last week the stats showed that U.S. consumer spending barely rose while inflation had its biggest annual increase in five years.
That implies that the Fed appears justified to raise rates further even though they should be appropriately concerned about rising price pressures.
Moreover, our rogue Fed President Neel Kashkari, the lone dissenter on the Fed’s decision to raise rates last meeting, reminded us that Congressional actions on taxes, healthcare, and trade will factor into future rate decisions.
Expectedly, the Modern Family paints its own picture.
The Russell 2000 confirmed the bullish phase. Yet, overhead resistance prevails.
Furthermore, while Granddad IWM kept the Harley engine revving, his wife and kids never came out to ride with him.
On Friday, Retail (XRT), Biotechnology (IBB), Regional Banks (KRE), and Transportation (IYT) all closed red.
Meanwhile, NASDAQ 100 and Semiconductors made new all-time highs. Semiconductors though, keeping in line with the Family, closed slightly red.
Neither the Dow nor the S&P 500 closed the month above key monthly Bollinger Bands. (Price channels that plot price volatility.)
Thus far, those Bollinger Bands indicate strong upward trends. Therefore, the March close below could turn out as moot.
Nevertheless, we do not rule out the close beneath the BB’s as a potential harbinger, given the weakness in the Modern Family.
Circling back to inflation, many commodities woke up and gained in price. The yields softened and the dollar moved a touch lower.
This week, we will watch how the market anticipates future inflation.
In equities, we will watch whether the Dow and the S&P 500 retreat further from the Bolllinger Bands. And naturally, our eyes are on the Modern Family.
One stroke of the brush and Mi Tierra can become either Roja or Verde.
S&P 500 (SPY) Closed the month under 236.35 the pivotal point Suggests correction with 232 next key support
Russell 2000 (IWM) Significant resistance at 140. Under 136.80 trouble
Dow (DIA) Closed the month under 206.60 the pivotal point Suggests correction with 205 next key support
KRE (Regional Banks) Teeny range inside day. 56.00 the 50 DMA resistance and 53.50 support to hold
SMH (Semiconductors) 79.10 first low to hold, 80 must clear.
IYT (Transportation)Teeny range inside day. Now must clear 165 and show muscle to 167.15 its 50 DMA and hold 162.50
IBB (Biotechnology) This must clear over 296 and hold 286.
XRT (Retail) 42.00 is a good level to hold but really, now it must get over the 50 DMA at 42.80.
GLD (Gold Trust) 120.25 the 200 DMA with 118 pivotal
SLV (Silver) Inside day above the 200 DMA
GDX (Gold Miners) 22.40 support 23.43 resistance
USO (US Oil Fund) Noise until it closes over 11.00
OIH (Oil Service Holders) 30.20-30.50 key weekly support
TAN (Solar Energy) 17.45-17.50 to clear
TLT (iShares 20+ Year Treasuries) 120.25 to 120.40 area pivotal to hold and 121 pivotal resistance
UUP (Dollar Bull) 25.78 support and 26.00 resistance
Every day you'll be prepared to trade with: