October 18, 2016
By Mish Schneider
We have a saying in Santa Fe, New Mexico. “If you don’t like the weather, wait 15 minutes.” Not unusual to experience 4 seasons in a day, a city situated 7000 feet above sea level engenders volatile weather patterns.
The Dow, flying 18,000 + feet above sea level, has seen similarly volatile weather patterns.
This past weekend, Keith and I went to see some friends perform in community theater. After the show, we waited backstage to give them our accolades. Of course they enjoyed hearing how much we enjoyed their performances. However, what they really wanted to hear from us was our assessment on the market. “Should I be nervous? Will I lose my IRA and 401(K)? Are the market pundits correct in saying we are heading for a crash?”
We told them first of all, never listen to the talking heads. Secondly, we reassured them a correction was overdue but not the end of the world.
Subsequently, now that the NASDAQ 100 ETF QQQs returned to an unconfirmed bullish phase, is that a double rainbow we see?
Over the weekend we talked about how “the best chance for Biotechnology IBB and Retail XRT’s rescue comes from two other siblings, Sister Semiconductors and Sister/Brother Transportation.”
We wrote that the Dow had to hold above 18k. The Russell 2000 has to regain and close above 122.
Another sib that showed promise close to a bullish phase, Regional Banks, must pitch in too.
Tuesday, after Netflix’s nearly 20% gain along with better-than-expected earnings in a few big banks plus high hopes for Intel*, QQQs and SMH did their job.
*Note-Intel sold off after the earnings report. After market down about 2.4%.
Regional Banks, like NASDAQ went back to an unconfirmed bullish phase. Both KRE and QQQ need a second day to confirm.
With that action enough to create the first rainbow glowing radiantly over our robot, can the second one forming in the background intensify as well?
Our ever vigilant watch of Retail and Biotechnology suggests only a maybe at this point.
Don’t get me wrong. Great news that IBB held the critical support at 264. Nevetheless, the very real hurdle of resistance at the 200 DMA or 275 looms.
Nevertheless, XRT with a fascinating railroad tracks pattern under all its moving averages, must comply. If the technical pattern on the daily chart proves worthy, we should see it reconcile one way or another very quickly.
Above 43.25 and its off to “The Merry ‘Ole Land of Oz.” Below 42.70 and “she’s gone where the goblins go.”
Precarious? Yes. Precisely why we will wait yet another 15 minutes for more favorable weather.
S&P 500 (SPY): I’d be happier with a close over 214. Now must hold 212
Russell 2000 (IWM) 120 pivotal with 122 good place to clear/close above
Dow (DIA) T-E-R-R-O-R if breaks and closes under 180
Nasdaq (QQQ) 117.40 pivotal 50 DMA
KRE (Regional Banks) 42.07 the 50 DMA to confirm over
SMH (Semiconductors) Bullish phase yes but has yet to clear back over the fast moving average at 68.40
IYT (Transportation) Holding the 50 DMA at 142.78
IBB (Biotechnology) 264 key weekly moving average
XRT (Retail) Inside day under the 200 DMA.
IYR (Real Estate) Needs a second day to close over the 200 DMA 77.98
GLD (Gold Trust) 119.90 must hold n
GDX (Gold Miners) 23.45 the 200 DMA support if good
USO (US Oil Fund) 11.35 pivotal point on closing basis held. Must now clear the recent highs to continue
TAN (Guggenheim Solar Energy) 20.00 pivotal-over 21 better
TLT (iShares 20+ Year Treasuries) 131 support 133.10 resistance
UUP (Dollar Bull) Looks higher still
Every day you'll be prepared to trade with: