Nothing Ventured, Nothing Gained

May 8, 2015

Mish's Daily

By Mish Schneider

Alive and Well, Are You Ready to Rock? Rise Against

What began as merely a great metaphor involving the Chinese New Year of the Sheep, became more solidly relevant through the first 3 months this year (even at the risk of sounding repetitive), and presently has me bowing my head to its amazing accuracy securing my faith that the 2015 trading range is alive and well.

I wrote Wednesday night, “In the spirit of our sheep pasture or trading range, these key levels that held up Wednesday in the S&P 500, NASDAQ, Russell 2000s, Regional Banks, Biotechnology and Transportation, could stymie the bear dance if they continue to hold up as the market heads into yet another of most-important-jobs-report-ever number on Friday.”

After the precipitous drop in the TLTs (20 Year Treasury Long Bonds), no surprise that as oversold as it was coming into Thursday, it would bounce. And so it did.

That tells me that the market, although under some pressure while the rates firmed, still never came close to selling off proportionately to the idea and recent sell off of the Long Bonds.

That’s not to say I am bullish since that would imply I expect new highs. Nor can I get too bearish either since I purposely selected 6 instruments (my Modern Family) to watch for a fair macro picture, and have observed over and over again how when the darkest days occur, at least one of those instruments perks up and ultimately carries the others out of the abyss.

Thursday, if we look strictly at percentage gain, that honor went to Transportation (IYT). Biotechnology, Retail (Granny, actually neck in neck) and Semiconductors certainly carried some weight and all outperformed the indices, nevertheless Trannies, not only had the biggest gain, but also cleared back over the 200 DMA closing just shy of it.

If you want to look at what I consider the best gauge going into tomorrow, let’s stick with Trannies. If they (IYT) convincingly clear 156.40, the 200 DMA, believe it. Conversely, if they break 155.50, believe it.

The other 5 will have my attention of course-Russell 2000s, Retail, Regional Banks, Semiconductors, and Biotechnology. All are in Warning Phases already with the exception of KRE, still in a bullish phase. However, if KRE breaks Thursday’s low, that will change quickly back to warning.

Henceforth, since it’s Trannies that have broken down the most, it stands to reason that they in turn need to hold here the most. If not, March lows and perhaps even lower to January lows becomes much more probable.

S&P 500 (SPY) 207 key support to hold and over 210 clears the outside day high after it had an inside day on Thursday

Russell 2000 (IWM) March lows 119.83 while over 122 impressive

Dow (DIA) An inside day like SPY. Therefore, good range to watch 180.25 to 177.25

Nasdaq (QQQ) Inside day here as well. Over 108 believe, under 105.50 also believe

XLF (Financials) Back to Bullish, after the see-saw of Warning, Bullish, Warning, Bullish, Warning, Bullish-forget the 50 DMA here-it’s the 200 DMA that has to hold or not

KRE (Regional Banks) 40.00 to 41.50 a range to break

SMH (Semiconductors) 56.25 good point to clear and 55.35 the point to hold

IYT (Transportation) 152 support and unless it gets back over 156.40, should see that support tested

IBB (Biotechnology) 332.60 support with a move over 350, much healthier

XRT (Retail) Held where it needed to making Thursday’s low important support. 99.62 the 50 DMA overhead

IYR (Real Estate) A bounce following the rate relief

ITB (US Home Construction) A 2-day bottom in place. Over 26.65 clears the 100 DMA

GLD (Gold Trust) That negative slope in the 50 DMA has prevented us from even looking at trading this right now

USO (US Oil Fund) Expected the sell-off after the topping candle Wednesday. 18.47 huge underlying support

XOP (Oil and Gas Exploration) First one in the group to visit the 50 DMA

TAN (Guggenheim Solar Energy) A fave for Friday now that it tested the 50 DMA and held it

TBT (Ultrashort Lehman 20+ Year Treasuries) Moved right up to the 200 DMA resistance on Wednesday, then retreated from it on Thursday.