October 2, 2017
By Mish Schneider
First and foremost, we take pause to reflect on the most vital part of our human existence-the sanctity of life.
The topic of money glares insignificantly compared to the tragedy in Las Vegas.
I write tonight’s commentary with a heavy heart.
Over the weekend, the Daily covered the strong possibility that Yellen’s (and 5 others on the Federal Reserve) days are numbered.
Because of that musing, watching the dollar and the 20-Year Treasury Bonds sat high on the priority agenda for Monday.
Also on watch, after Yellen’s comments on the mystery of low inflation, we were particularly keen on how the rising dollar would impact commodities.
Many existing Fed Governors weighed in today.
Kashkari, a dove, wrote that the Fed’s rate hikes are causing low inflation.
Kaplan says that he sees a deficit funded tax cut causing a headwind for future economic growth.
He also expressed concerned about the Federal Reserve retaining political autonomy. Marsh, a front-runner for Chairman, has stated the opposite.
Kaplan further articulated that the Fed has room to hike but not as much as people think.
It appears the stock market believes that the Fed will do right by it. Today, in melt-up fashion, three indices roared to new all-time highs.
Therefore, if the stock market roots for a dovish Fed that’s not so autonomous-doesn’t that also make commodities ready for a Rocky Mountain High?
NASDAQ 100 gained, yet with FANG stocks not as popular right now, it remains over $1.00 away from its all-time highs.
Logically, with a market and many instruments at nosebleed levels, investors looks for value.
However, many stocks have already taken off from their languishing bottoms.
The Russell 2000 closed last month over the channel I showed you repeatedly and delivered
Remember my focus on Biotechnology 2 weeks ago? Market needed specs to fuel it and it got it.
What has yet to take off? Most commodities.
The dollar did indeed gain.
UUP, the ETF, cleared the 200-week moving average. That makes 24.30 pivotal.
The 20+ Year Treasury Bonds lost value. TLTs ended lower. Under 123.97, last week’s low, I expect a test of 122.70 area.
Both a rising dollar and higher rates put pressure on commodities.
Gold reacted as such.
Still, gold miners closed a bit higher. Steel, Wood, Cattle, and Sugar all gained. Crude Oil fell, but held support at $50 a barrel.
Grains all sank as well.
DBA, the agricultural ETF, had about half the daily average volume on a down day. This follows Friday’s accumulation in volume on a strong up day.
A scenario to look for now that we are in melt-up mode?
The dramatic top we’ve sought for months. Call it the final stage of disbelief or the time when the last of the reticent buy stocks…
Or maybe it’s because on top of everything else, we said a tearful goodbye to Tom Petty.
S&P 500 (SPY) 250 pivotal support with this on new highs.
Russell 2000 (IWM) 145 ultimate support but 150 now pivotal
Dow (DIA) 223.97 now pivotal as the old high
Nasdaq (QQQ) 145 is big support to hold now as this is still some ways from the recent all-time high.
KRE (Regional Banks) Inside day so if the rates point up, this should as well
SMH (Semiconductors) Another new high our sister!
IYT (Transportation) 175.75 pivotal support to hold although this does look higher
IBB (Biotechnology) 340343 resistance with now 337 pivotal support
XRT (Retail) 41.75 the 200-DMA (an unconfirmed accumulation day). 42.23 big weekly resistance to clear
IYR (Real Estate) 78.00 huge
XLU (Utilities) 52.00 big support and a decent area to probe long.
GLD (Gold Trust) 120.80 pivotal with a move back over 122.00 much better
GDX (Gold Miners) 22.80 support to hold. A move over 23.53 time to consider.
XME (S&P Metals and Mining) 32.00 key support
USO (US Oil Fund) A weekly close over 10.47 good. 10.00 support
XLE (Sel Energy Spdr Fd) 68.65 the 200 DMA
OIH (Oil Service Holders) 25.40 should not hold
TAN (Solar Energy) 21.00 major support to hold. Resistance at 22.00
TLT (iShares 20+ Year Treasuries) 126 resistance with under 123.97 see 122.60 then 119.00
UUP (Dollar Bull) 24.30-40 big area to clear and 24.00 pivotal support
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