July 2, 2016
By Mish Schneider
Mish as Charlie Chaplin Photographed by Kerry Sherck
The film Charlie Chaplin wanted most to be remembered for is “The Gold Rush.” Indeed, last week’s market saw its own version of a gold rush. Cash gold ended above the 200 week moving average for the second week in a row. The last time it traded above that moving average was in April 2013.
At present, the film has even more relevance. Charlie, besides his fame as portraying an (English) Tramp, plays a lone prospector nearly starved to death whilst stuck in a cabin waiting out a storm. Luckily, a bear enters the cabin and is killed, thus supplying him with food but no gold.
Last week, bears that unwittingly entered cabins inhabited by market bulls met the same fate. Sellers, in shorter and shorter supply, were happily gobbled up by hungry bulls.
Meanwhile, the gold deposit grew larger along with gold miners and silver. Oil steadied, coffee and sugar surged while grains fell amidst the forecast for rain and milder temperatures.
As it came “this” close to 18,000, the Dow peeked out the window of the Twilight Zone airplane and saw yet another gremlin on the wings.
Therefore, this coming week we are switching our focus away from the outperformers towards the underdogs in honor of The Tramp.
All the other indices improved in phases with NASDAQ, our emphasis last week, recapturing the 200 DMA. The obvious test of strength in QQQs will be its ability or not to hold 107.50.
Long Treasury Bonds rose further while Bank ETFs fell. The Financial ETFs, Regional Banks (KRE) and XLF should not be ignored. KRE sits in a Bearish Phase. Last Friday, KRE traded within the range of last Thursday (inside day). Although it held on tight to the 200 weekly moving average, this coming week it must continue to do so or trouble might loom.
Even more salient to watch, our Granddad Russell 2000 back in a Bullish Phase, has to clear last Friday’s high or it could see a quick test of the 113 area. Taking nothing for granted, IWM has crashed when it looks best and failed when it looked its worst.
Retail can swing either way. The longer term charts suggest lower. However, if XRT holds above 42, that picture could change.
Finally, speculative money did return to the market through the move up in Biotechnology. That may or may not mean anything though, as the speculators sat out on the May rally. It’s very possible new longs can become bear food should anything new disrupt market confidence.
A spectacular rise in the metals, historical low interest rates, renewed attention to equities, trouble in the EU and mounting soft commodity prices. The Federal Reserve might just find themselves stuck in a slapstick comedy of errors!
Chaplin ate a bear to give him the strength to continue his search for the gold. At the end of “The Gold Rush” he heads back to the cabin, only another blizzard hits nearly blowing the cabin off a cliff. Just before the cabin falls into a chasm, The Tramp is pulled to safety. Ironically, he finds the gold deposit.
Now that the market has devoured the bears, what if another blizzard hits the US markets? Having pockets filled with gold, will our Tramp nevertheless fade to black?
S&P 500 (SPY) Perhaps the last of the shorts covered ahead of this long weekend. Now, 207.70 is still the pivotal 50 DMA and 210.87 the pre-Brexit high
Russell 2000 (IWM) 116 important level to clear on several time frames
Dow (DIA) 179.83 the pre-Brexit high. 176.70 underlying support
Nasdaq (QQQ) 107.44-107.66 is where the moving average support it. As weakest index, it must clear pre-Brexit high of 108.79
XLF (Financials) Could not get over the 200 DMA at 22.92. Under 22.50 trouble
KRE (Regional Banks) 38.55 good resistance. Under 37.50 suspect and possibly a good low risk short
SMH (Semiconductors) Could not fill the gap to 58.55. It had a very narrow range and quiet day relative to many other sectors.
IYT (Transportation) 134 good support level to watch for a hold. Then, substantial resistance at 138. One way or another, watching this sector carefully.
IBB (Biotechnology) So now that this found buyers-is it smart money or fool’s gold?
XRT (Retail) Closed right at the 50 DMA for a last minute unconfirmed recovery phase. That makes 42.35 pretty darn important as a level
IYR (Real Estate) What a week. Hard to think recession when you look here making so many geniuses look slightly less so right now.
ITB (US Home Construction) Trading higher than pre-Brexit. Through 28 good
GLD (Gold Trust) What can I say? Hopefully you’re welcome will suffice. First close over the 200 WMA
SLV (Silver) 19.40 the 200 Week Moving Average
GDX (Gold Miners) 31.35 the last swing high in August 2013. 28 support now
USO (US Oil Fund) Must clear the 50 WMA at 12.01. I think it will.
OIH (Oil Services) I would look at dips to buy close to 29.00
XLE (Energy) 67.50 support
XOP (Oil and Gas Exploration)
UNG (US NatGas Fund) 8.94 the 50 week moving average
TAN (Guggenheim Solar Energy) Such low volume all last week. I am waiting to see some
TLT (iShares 20+ Year Treasuries) Commodities keep rising. I know this is a bubble. I feel it in my bones. What I don’t know is the exact timing of when that occurs.
UUP (Dollar Bull) 25.05 the 200 DMA resistance which failed perfectly. 24.70 support
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