October 28, 2015
Mish's Daily
By Mish Schneider
Day of the Dead is a 3-day holiday that focuses on gatherings of family and friends to remember and pray for those who have died. Families build altars to honor the deceased using sugar skulls, marigolds and the favorite foods and beverages of the departed.
It begins with Halloween and ends on November 2nd with All Souls Day. This year, since yours truly has been long sugar since September 6th, my altar consists of sugar ETFs instead of skulls.
Honoring the long deceased agricultural commodities, I am sprinkling the rest of the altar with related food and beverage items to invoke a resurrection. Many agricultural commodities, besides sugar, have already begun to rally.
For today, however, let’s take a trip to the Modern Family’s abode, and catch up with our Prodigal Son Regional Banks (KRE).
As primarily a position swing trader, I was skeptical about the recent equity rally because of the Modern Family and the dissension among the members.
True to the synchronicity of how Granddad Russell 2000s, Granny Retail (XRT) and Regional Banks (KRE) trade together, I found it difficult to have a sustaining bullish bias.
Why the move in our Prodigal Son Regional Banks (KRE) changed my mind.
Regional Banks love money. They love a strong dollar. They love the notion of firmer interest rates…..wait a minute-didn’t the Federal Reserve announce Wednesday that rates are staying close to zero?
Indeed they did. Yet, KRE rallied like it’s 1979 (a period of rising interest rates) and IWM finally got a strong close over 116. That has not happened since September 16th 2015 and only for a couple of days at that.
If KRE is happy and IWM is happy-can Granny be far behind? XRT still has to clear the 50 DMA for 2 consecutive days to get happier. If it does, that will send a pretty clear signal that whether the FED raises rates or not, the market is counting on better times ahead.
What are Regional Banks KRE going as this Halloween? No, not Donald Trump! However, speaking of 1979, one of the most popular costumes back then was anything from Star Wars.
With the anticipated release of the new Star Wars 2015 version, whether KRE dresses as Chewbacca, Darth Vader or the Jedi, seems both KRE and IWM are placing light sabers on their Day of the Dead altars.
“May the force be with you.”
S&P 500 (SPY) If IWM is waking up this should head to 213.00
Russell 2000 (IWM) With the high volume move over 116, should be clear skies until 119
Dow (DIA) Who can argue with that move over the 200 DMA?
Nasdaq (QQQ) 114.39 the 2015 high. After the 3 day consolidation obvious haw that reconciled.
XLF (Financials) Cleared the 200 DMA
KRE (Regional Banks) Big move here. A gap higher probably means a tackle of the 2015 highs at 45.62
SMH (Semiconductors) Did its job already steadying the market last month
IYT (Transportation) The weak sibling now is Transportation. If holds today’s low, then will look back at 146 to clear
IBB (Biotechnology) Unconfirmed phase change to recovery-first time over the 50 DMA since August
XRT (Retail) Closed over the 50 DMA. Needs a second close, and to clear 46.50
IYR (Real Estate) Wild chart
ITB (US Home Construction) Over 28 still a point on a closing basis to clear
GLD (Gold Trust) Acted like rates will rise and the dollar will get stronger
SLV (Silver) With all the volatility, it still closed over the 200 DMA and failed to have an reversal pattern after making new 60+ day highs
GDX (Gold Miners) GDX needs to clear 17.00, hold 15.40
USO (US Oil Fund) I wonder if the bears here changed their minds? Cleared the 50 DMA and will watch for a confirmation
XLE (Energy) At this point, should wait for this to clear 69.00
UNG (US NatGas Fund) Looks like a possible exhaustion gap to the downside
TAN (Guggenheim Solar Energy) Back over the 50 DMA. Looking for a weekly close over 31.00
TLT (iShares 20+ Year Treasuries) A muted reaction compared to the rest of the market
UUP (Dollar Bull) Have dollars will travel
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