So Close, Yet So Far (From Paradise)

February 5, 2015

Mish's Daily

By Mish Schneider

Elvis Presley

With the top of the January Calendar Range so close in all of the four indices, I have two songs in my head. The title song since paradise happens if those highs are breached. But also, Carole King’s song “So Far Away”, since like the lyrics suggest, “Long ago I reached for you and there you stood. Holding you again could only do me good.”

Here are the magic numbers translated into the corresponding ETFs: S&P 500 206.88, the Dow 179.23, NASDAQ 104.14, Russell 2000 120.56.

What makes the anticipation of a rally through the January highs (please note intraday moves are not enough-needs to close there in at least 2 of the indices), is that the market has traded within the range for 25 days thus far. If you think simple physics, the longer something is compressed, the bigger the explosion once the lid comes off.

However, might I also present another reality that holds slightly less than equal probability? We test the highs of the range, even pierce it for a day and then fail since the trading range might also be just that-a range that gets tested (as it did on the low end in SPY, DIA) but ultimately gets respected as resistance.

Interest Rates firmed or Long Bonds dropped on Thursday which helps. Oil (deflation fears), abated and held where it needed to; yet, needs another push over 20.00 (USO) to sustain. The Financials (XLF), cleared 23.77 handily although remain in a warning phase for now. Even more impressive, the performance in Regional Banks (KRE), an area I believe has tremendous potential should the market hold steady in 2015.

Yet another song, same theme (“So Far Away” 14 Shades of Grey Album by Staid)

“Now that we're here, it's so far away
All the struggle we thought was in vain
An' all the mistakes one life contained
They all finally start to go away.”

S&P 500 (SPY) Unconfirmed Bullish Phase 204.44 now should hold

Russell 2000 (IWM) Bullish Phase should hold 117.51 the 50 DMA

Dow (DIA) Bullish Phase the 50 DMA at 176.46

Nasdaq (QQQ) Unconfirmed Bullish Phase Needs to hold 103.18 the 50 DMA.

XLF (Financials) Resistance now at the 50 DMA 24.18 with 23.77 support to hold

KRE (Regional Banks) Cleared everything and will look for an entry

SMH (Semiconductors) Unconfirmed Bullish Phase if holds 54.44

IBB (Biotechnology) 321.25 now resistance with support at 311

XRT (Retail) Cleared 96.00 intraday and closed right there

ITB (US Home Construction) Held 26.16 and now has an inside day

GLD (Gold Trust) Over the 200 DMA so worth watching.

GDX (Gold Miners) Over 22.70 could be start of a good move higher