February 3, 2016
Mish's Daily
By Mish Schneider
Five Little Monkeys Swinging in the Tree..
In the children’s song, the monkeys are teasing Mr. Alligator that he can’t catch them. However, Mr. Alligator comes along quiet as can be and snaps that monkey out that tree.
Last night, in honor of the upcoming Chinese New Year of the Fire Monkey I wrote, “As soon as the sell orders dry up, the monkey will jump to the next tree looking for the buy fruit.”
If Mr. Alligator represents the bulls, did Wednesday’s reversal in the S&P 500 off the lows, catch the monkeys off-guard in the bear tree and send them scrambling for fresh fruit in the buy tree?
Moreover, once the Monkeys landed on the bull tree, was there really any fruit at all?
The S&P 500 had a couple of technical setups that are pretty. First, Wednesday’s’ low 187.10 was slightly above last Wednesday’s low 187.06.
Secondly, both lows are above the January 6-month calendar range low at 185.52. Finally, although the performance found buyers (read one huge money manager had 1.6 Billion to buy in SPY), the S&P 500 could not close above Tuesday’s high 191.97.
Therefore, quick and clever monkeys got to eat. Slower ones or shall I say less agile ones, may have found themselves out on a limb, hungry and vulnerable.
Those of us trading commodities, though, dined well.
Happily, the forest houses lots of different types of fruit trees. Monkeys dine on hundreds of types of fruits found in the forests where they live. As fruits are seasonal, the monkeys move around their home habitat to find them.
Much of the same can be said of following and trading different asset classes. For example, with the decline in the market indices and many sectors and groups, 20+ Year Long Bonds (TLTs) enjoyed a substantial move higher, even after the FED raised the interest rate.
Gold, at the same time, bottomed and then rallied nearly $90 off the lows. Typically, a rise in GLD and a fall in equites sends the US dollar lower and the Euro higher.
From there, other commodities begin to benefit such as certain agriculturals, oil and softs such as coffee.
If the Euro runs, emerging markets may start to perk up.
Following, understanding and trading in the different asset classes is, using my new favorite metaphor, the same as monkeys that determine what will be readily available during particular times of the year.
Like good traders, by calculating the risk/reward, the monkeys swing to and eat from the budding trees.
Special Note: I’m doing a webinar teaching you how to deal with this monkey. I’ll also show you how to trade my 10 Mega Trends for 2016! It will be on Friday, February 5th at 12:00 EST. Click here
S&P 500 (SPY) 192 would be a good area to clear now, then 195 with 190 the place to hold
Russell 2000 (IWM) Closed marginally on the 10 DMA. Like to see this clear 101.47 for confidence
Dow (DIA) The longer this builds a base at these levels the more chance it has to see 170 again. But not holding my breath for that just yet
Nasdaq (QQQ) 100 Support and needs to clear 104
XLF (Financials) Fins must find a footing for any sustained market rally. This did make a new low with big volume so maybe blow off.
KRE (Regional Banks) Did not make a new low like XLF so rather watch that for now
SMH (Semiconductors) If can recapture 50.00 better.
IYT (Transportation) 125 resistance and 120 support
IBB (Biotechnology) This made a new low with big volume so maybe blow off and solid reversal pattern. That will help
XRT (Retail) Hovering on the 65 weekly moving average at 40.59. We can call that pivotal and key
IYR (Real Estate) Sloppy but better over 72
GLD (Gold Trust) Unconfirmed accumulation phase
GDX (Gold Miners) If 15.00 holds now much better shape for a good move higher
USO (US Oil Fund) Like to see this hold 9.00 now and then clear 10
XOP (Oil and Gas Exploration) 26.60 should hold if going higher
TAN (Guggenheim Solar Energy) Still seems to be stalled here. Needs to clear 25.25 on a closing basis.
TLT (iShares 20+ Year Treasuries) 127.92 the highs from January is now support and interestingly, the low today.
UUP (Dollar Bull) Well, I have been negative. Unconfirmed phase change to distribution. Need a second day to confirm
FXI (China Large Cap Fund) Back over 30.00 so that’s good
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