Stock Market’s Egg Tossing Contest

May 28, 2019

Mish's Daily

By Mish Schneider

blankOver the weekend, we went to a party. After most of the guests had enough beer to drink, the host organized an egg tossing contest.

Egg tossing, more popular than I would have imagined, actually has its own world championship!

The egg throwing world record distance to date is 81 metres or 265 feet.

The irony is that egg tossing began as a symbol of rebirth both for man and the earth.

By the end of the game though, the egg breaks.

Similarly in the market, today began with what looked like a rebirth of a rally, only to end leaving egg on bull’s faces.

Currently, so many factors are players in the market’s egg toss.

In the market, we see lots of eggs already broken.

In no particular order, we begin with interest rates. The yield is slipping as a result of China trade war fears. Today, yields hit a 19-month low.

Why is that an egg waiting to break?

The main concern is not if China continues to slow down its purchases of U.S. debt. It makes sense for China to hold US debt because it keeps the Yuan lower than the dollar-which makes their costs cheaper.

The bigger risk is that the global and US economy continue to falter. If so, the Federal Reserve, the biggest buyer of its own debt, is forced to lower interest rates further.

With the US debt at $22 trillion, the Fed lowering rates is just like printing money. That would impact the strength of the dollar. The broken egg here is potential stagflation.

Another broken egg is US domestic policy in flux.

An infrastructure plan, for instance, does not exist. Today, the Transportation sector ETF, IYT, led the market lower.

Yet another egg is Iran and North Korea. One never knows how much distance their leaders will create to throw eggs at US and the allies.

Finally, even with tariffs, corn and soybeans have made a substantial rally off the lows.

Mother Nature has created havoc. Although demand is down for corn, production has slowed considerably. Uncertainty about the size of the 2019 corn crop will continue for the next few months.

The next egg tossing world championship occurs in England at the end of June.

In 2017, the Russian egg roulette winner, Julie Moens, revealed some strategy: “ I went up there and listened to the eggs and let the eggs tell me which one to pick.”

I hope it’s with the same strategy you listen to what the market tells you to pick.

Every Tuesday and Thursday, I will be on KKOB radio at around 6:15 mountain time (8:15 EST) to discuss markets and market news.

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S&P 500 (SPY) 284.50 turned out perfect resistance. Now, with minor support at 280, we will look to see if 277 or where the MAs sit, holds up.

Russell 2000 (IWM) The 3/25 low was 148.41. Significant? Only if it holds. 152.50 good resistance

Dow (DIA) 253.40 is the 50-week MA. If that fails, besides IWM, it will be the second but not the last index to break that level. Resistance at 257.00 held

Nasdaq (QQQ) If this cannot get back over 179.85 (it could not), then 174.40-174.60 is the test of the underlying MAs.

KRE (Regional Banks) 51.36 the 200-WMA holding.

SMH (Semiconductors) 101.20 the 200-DMA resistance with 98.50 minor support

IYT (Transportation) 180 next best support with 184.50 resistance

IBB (Biotechnology) Sits right on the 200-week moving average. With further selling, this could see 100 next.

XRT (Retail) Not so pretty. 42.40 huge resistance with some support around 40.00

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