October 21, 2014
Mish's Daily
By Mish Schneider
Let’s begin with a shout out to the Dow for its observance of “200 is the New 100” one more time! Another shout out to the S&P 500 for the best day in 2014! Cheers!
Payday for the bulls, a day of short-covering for the bears, and perhaps a tad too late to first enter long if one were in cash all this time. Why? Even with the very impressive move off of last Tuesday and Wednesday’s lows, and in spite of the phase improvements from Distribution to Warning in NASDAQ (QQQs) and S&P 500 (SPY), all still live in negative phases. The Dow, (DIA) barely cleared the 200 DMA and The Russell 2000 (IWM), although beyond 110, remains in a Bearish Phase.
The three salient sectors back to Bullish are Real Estate, Transportation and Biotechnology. This tells a story although not necessarily the whole story. As your humble narrator I must ask you to ask yourselves-what has fundamentally changed to believe the market can head to new highs from here?
If you do have an answer, please feel free to share. (Incidentally, I encourage my readers to share comments with me in an email or tweet anytime.) If you drew a blank as to why we should see new highs, then do ask yourselves the very tangible question of what must one risk on that low probability? Furthermore ask yourself, what type of trades should be executed right now given recent high volatility-Daytrades? Miniswings. Position Swings?
Our Market Tone Indicator says have Day to Miniswing trades only in equal parts Long and Short. I find that sobering or at the very least, an excellent reason to keep exuberance at bay.
For redundancy sake, anything is possible. I have seen the market defy and even reinvent logic. But for my eyes, I seek pockets of weakness for the next best shorts while I continue to take profits on the longs we‘ve held since anticipating this current move higher last week.
S&P 500 (SPY) 190.76 is the 200 DMA and although far enough away now, worth noting. 196.80 is the 50 DMA overhead
Russell 2000 (IWM) Cleared 110 which once again is a pivotal number. 112.37 is the 50 DMA and under 110 expect to see 108.80
Dow (DIA) Closed above the 200 DMA at 165.63 and now needs to stay above it.
Nasdaq (QQQ) 97.91 is the 50 DMA and now, 95.00 important support to hold
XLF (Financials) Confirmed phase change to warning with the 50 DMA at 23.07
KRE (Regional Banks) 37.14 now support
SMH (Semiconductors) No island bottom but a very impressive move to fill the gap from 10/08. Can it clear 50.00?
IYT (Transportation) Unconfirmed bullish phase
IBB (Biotechnology) Confirmed bullish phase and the vote for the first one to tell us whether or not this market can match or take out recent highs
XRT (Retail) Unconfirmed phase change to warning. 84.72 the 200 DMA
IYR (Real Estate) Confirmed phase change to bullish
ITB (US Home Construction) Confirmed phase change to Recovery
GLD Tested but couldn’t quite clear the 50 DMA. That could mean time for a pullback unless it gaps above it Wednesday
USO (US Oil Fund) If deflation is still a concern, this did not do much to impress
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal area held
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