March 20, 2016
Mish's Daily
By Mish Schneider
Everything Matters
Remember last month I was all about the 6-month Januray Calendar Range as the gold standard to help us determine where the markets might go from January 15th until July 14th.
Now that we are halfway through that Calendar Range, I decided to have a look at the major indices, a few commodities and last but not least, my Modern Family and where they all sit relative to that range.
For this Daily’s purpose, I will explore the S&P 500. I will note how the other ETFs are faring in the ETF notes that follow the commentary.
Back in early Feburary, SPY broke below that range for 4 trading days. On February 12th, SPY traded back above that low (185.52) and has enjoyed a trip not only to the high of the 6-month range (201.90) but consideraly above it.
Of course there are other layers to look at concerning the SPY. Most glaringly is the lack of volume since February 12th. Many technicians will tell you only price matters. If only it were that simple.
What else matters?
Price, volume, chart patterns that yield high/low probability, chart patterns of various timeframes (daily, weekly, monthly, yearly), moving averages, relative strength, in some universes Fibonacci sequences, among other technical analysis matter.
Fundamentals such as economic data, earnings reports and Fed Policy also matter. Market sentiment matters.
If that’s true, then why look at the 6-month Calendar range mid-term?
Quite frankly, any and all of them matter to the eyes of the beholder. Consistency is important. Furthermore, and my focus today, consensus or safety in numbers for me, matters most.
Looking for consensus in the SPY
Undeniably, the price looks impressive. As the weakest index on February 11th, the comeback to date has shocked and awed many investors. In fact, many are not involved which explains the low volume ever since.
The chart pattern, which for a while suggested a ginormous head and shoulders top in the works and one I myself explored in depth during an earlier Daily (can search the archived Daily’s on our website), now advocates an equally stellar double bottom that could be the next big thing.
The weekly and monthly charts both show significant changes in patterns. For starters, on the weekly chart, SPY has cleared the 50 week moving average. On the monthly chart, although inconclusive while March is only half over, at this point has the SPY trading over the 23 month moving average.
Relative Strength across three timeframes-daily, weekly, monthly indicates rich but not overbought on the daily, approaching overbought on the weekly, and in great shape on the monthly.
The Fibonacci Sequence shows that from the November 3rd high to the February 11th low, we are at a 76.40% retracement level. That makes 204 a key support area to hold.
Fundamental data, including recent Central Bank monetary policy, backs an interpretation that the economy is slowly improving but not enough to merit raising interest rates. On Friday, Ben Bernanke wrote in his blog that the Fed still has the option of implementing negative interest rates if need be.
Given the positive press after Draghi and the ECB went to negative rates, followed by the accolades that our Yellen remains dovish at this point, has helped an overall bullish sentiment return to the market.
Weighing all the information as dispassionately and objectively as I can, the conclusion and consensus overwhelmingly supports “all systems go.” Could it really be that easy?
S&P 500 (SPY) 204 is a really good basis or pivotal point to measure how this week might turn out
Russell 2000 (IWM) Finally cleared the 100 DMA but not the 6-month January Calendar Range High (JCRH) at 110.83
Dow (DIA) 175 pivotal and yep over the 6-month JCRH at 171.32
Nasdaq (QQQ) Must continue to hold 106 and clear 108. 110.18 its JCRH. Not even close
XLF (Financials) 22.85 the 100 DMA. 23.53 the JCRH
KRE (Regional Banks) 41.27 the JCRH-pretty far away
SMH (Semiconductors) 52.86 the JCRH long gone now-so we can call it support
IYT (Transportation) Forget it-JCRH in the rear view mirror. Trannies rule!
IBB (Biotechnology) Big Bro hardly matters-still UNDER the 6-month January Calendar Range Low at 276.86.
XRT (Retail) 43.40 the JCRH. Also confirmed the accumulation phase
IYR (Real Estate) 75.78 the JCRH-good support level to hold
ITB (US Home Construction) Interestingly, last Friday cleared the JCRH for the first time
GLD (Gold Trust) That boat sailed in January. JCRH 106.24
SLV (Silver) Second close over 15.00. 13.70 the JCRH
GDX (Gold Miners) Like gold, a distant memory of that JCRH
USO (US Oil Fund) 11.42 the JCRH. Seems far.
OIH (Oil Services) Above the JCRH at 26.80
XLE (Energy) Also above the JCRH and doing even better than OIH-60.78
XOP (Oil and Gas Exploration) One to watch this week sitting right on the JCRH at 30.84
UNG (US NatGas Fund) Not even close to the JCR low
TAN (Guggenheim Solar Energy) Over the JCR low and more interestingly in its weakness, if clears 25.33 has lots of room to test the JCRH at 31.30
TLT (iShares 20+ Year Treasuries) 125.96 the JCRH-interesting support level
UUP (Dollar Bull) A great short and called out here once this broke under the JCR low at 25.50
EEM (Emerging Markets) Over the JCRH
FXI (China Large Cap Fund) Fascinating-this is just about at the JCRH at 34.22. Major resistance or a game changer
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