Santa: "Calm Down,; It's Only November

November 2, 2014

Mish's Daily

By Mish Schneider

“There is something in October sets the gypsy blood astir: We must rise and follow her, When from every hill of flame She calls, and calls each vagabond by name.”
William Bliss

This October will go down in the annals of finance history as one where all traders became vagabonds, rising and following the flame of the gypsy market. The market dropped 10% from its peak high in the S&P 500 at 201.90 posted September 19th, only to bottom on October 15th with ginormous volume, then proceeded to roar back 10% by month’s end, missing the September high by 8 ticks. The Dow Jones Industrial Average closed on new highs as did the ETF DIA.

This October the Federal Reserve said goodbye to Quantitative Easing, The San Francisco Giants squeaked a World Series victory, Ebola struck fear in the hearts of Americans, AAPL released the iPhone 6, Tim Cook came out of the closet, and George Clooney got married.

November should begin as sweetly as October ended. No signs of danger as of last Friday’s close-no blow off volume or strong reversal patterns in any of the indices. In fact, we have a possible runaway gap in NASDAQ. The rotation to the Financial sector went well, Oil and Gas although near lows, could form bottoming patterns, while Gold and Silver made shopping for jewelry more affordable, (that and a strong US Dollar.)

Americans are making and spending less, but we feel wealthier with strong consumer confidence. This week brings midterm elections-the results could be a market mover-will be a matter of expectations met or not, followed by perception.

For now, stay the course, especially with many more earning reports due out this and next week. However, keep eyes peeled for signs of a top-islands, blow off volume, reversal patterns, etc. At the same time, look out for the next rotation, both long and short (Homebuilders did little to wow last week.)

"Autumn is marching on: even the scarecrows are wearing dead leaves."
Otsuyu Nakagawa

S&P 500 (SPY) 201.90 the old high which could be left in the dust with a strong Monday open. Otherwise, a gap lower will definitely make newer, weaker longs nervous

Russell 2000 (IWM) September peak high 117.80, Friday’s high 116.96-therefore, an extremely important piece of the puzzle. Has to continue running or another early warning sign if cannot

Dow (DIA) New high close

Nasdaq (QQQ) Friday’s low 101.07 now the place to hold to support the theory or a possible runaway gap

XLF (Financials) Interesting September high 23.88 Friday’s high 23.87-cool

KRE (Regional Banks) Overbought and could not match September high-good to note these levels

SMH (Semiconductors) Great comeback. Back to unconfirmed bullish phase if holds 50.15

IYT (Transportation) Definitely a place to look for more upside

IBB (Biotechnology) New highs

XRT (Retail) Strong market and this will have more to go

IYR (Real Estate) New high close!

ITB (US Home Construction) Should have done better so for now, making this a number place to look for shorts should the market turn over

GLD (Gold Trust) Way oversold!

Metals and Mining (XME) Relative to gold this looks like a bottom forming