July 29, 2017
By Mish Schneider
“Hey Rufous, check out the Black-Chinned Female Hummer drinking from the sugar well like there’s no tomorrow. Whaddya say? Should we muscle in on her territory.”
“Nah. Let her drink the sugar water until she becomes dopey with serotonin.”
This past week, that could have easily been the dialogue between the bulls and the bears.
Bulls are the Rufous Hummers while Bears are the Black-Chinned ones.
The Bulls flew overhead in search of sugar.
However, once the Transportation Sector began to weaken, the Bears sucked up the rally nectar and drained the well.
The Russell 2000 declined in price as did the NASDAQ and S&P 500.
That kept the bulls, with a pattern of swooping in to buy every dip, more sidelined than typical this year.
How much nectar can the Bears suck up before the Bulls get thirsty enough to dominate?
Warning signs popped up all around last week, including the obvious one when Transportation (IYT) went literally into a Warning Phase.
Furthermore, IYT looked ready to explode at one point. Nevertheless, IYT’s wings beat fast, but alas, not fast enough.
After clearing the top of the monthly chart and making new all-time highs, IYT weakened nearly $10.00 from its peak or over 6%.
Although the Russell 2000 remained in a bullish phase, it closed well under the top of the monthly channel it had only a few days before pierced above.
That makes 172.50 and 142.90 respectively (IYT, IWM) the key areas to close above by the end of day Monday.
Once the word got out that Black-Chinned Hummers could drink without fear of attack, more flew in.
Regional Banks (KRE) uncertain about the Fed’s next move on rates, joined IYT into an unconfirmed Warning Phase.
Unconfirmed because Monday it could remain below the 50-day moving average or find the strength to fly above it.
Strikingly, most of the indices and Modern Family sectors posted inside trading days.
NASDAQ (QQQ), SPY, IYT, Biotechnology (IBB), Semiconductors (SMH) and even Retail (XRT) in her stronger phase, all traded Friday inside the Thursday’s trading range.
Those instruments flapped their wings enough to remain stationary, just like the Rufous Hummingbirds in the photo.
Unmoved by hungry bears thus far this year, our fat and not-as-happy bulls now worry.
When hummingbirds are comfortable with the food source, they bravely fly in to feed.
Yet, when normally aggressive Rufous Hummers become outnumbered, they fly elsewhere.
S&P 500 (SPY) Inside day. 248-245.68 range to break one way or another
Russell 2000 (IWM) 142.90 big number for the month end close. Above, holds over the top of the monthly channel. A close below, could be perceived as a failure. Under 140 could see 134
Dow (DIA) Amazingly, new all-time highs-where the Rufous feed
Nasdaq (QQQ) 144 pivotal-closed right there with an inside day
KRE (Regional Banks) Unconfirmed warning phase. 54.20 pivotal
SMH (Semiconductors) Inside day 88.00 resistance to clear. 85.35 the 50-DMA
IYT (Transportation) Confirmed warning phase. 164 the 200 DMA
IBB (Biotechnology) Inside day after the Reversal bar
XRT (Retail) 40.44 support and if holds 41 could see 43.00
IYR (Real Estate) Held the bullish phase marginally
XLU (Utilities) confirmed bullish phase
GLD (Gold Trust) Cleared all weekly moving averages. Good sign if holds 118
SLV (Silver) 15.25 support. Over 16 looks good
GDX (Gold Miners) 2 Inside days-now that’s exciting!
USO (US Oil Fund) 10.00 pivotal. 10.60 big resistance
TAN (Solar Energy) A monthly close over 21.65 reverses a down trend
TLT (iShares 20+ Year Treasuries) Below 122.80 would be indication of higher rates to come. 124 resistance
VXX (Volatility Index) Some buyers out there
UUP (Dollar Bull) Broke the 200-week moving average-sign of more weakness expected
FXI (China) Inside day
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