Synchronized Skinny Dipping

August 12, 2015

Mish's Daily

By Mish Schneider

We used to have an in ground pool. Only once did we actually see a floatie and that was a gift from my sister-in-law’s 13 year old Sheepdog who loved to go swimming.

We called the pool guy. He tested the pH and added chemicals to restore balance. He skimmed the debris and added chlorine. He shocked the pool.

The market pool can be called a trading range perimeter. China, we established, is the floatie that emptied the pool. China, is doing their version of Quantitative Easing by devaluing their currency.

The China ETF (FXI) broke the 2015 trading range on July 8th. It’s holding the July 6-month Calendar Range low. The Phase is about to have a death cross or go to Bearish.

With the Yuan weaker, the possibility of it joining as a reserve currency seems less likely. That keeps the US Dollar’s status as a dominant currency more plausible.

So, if we call the Federal Reserve the pool guy that could mean China’s flush is the Fed’s opportunity to skim out that turd. It could mean that the Fed will “shock” the pool and take this opportunity to raise the interest rates.

What will that do for our Modern Family (IWM, XRT, IBB, SMH, IYT, KRE)? With the TLTs 20+ Year Treasury Bonds, falling back below the 200 DMA and possibly putting in a reversal top, we already saw the water clearing for some of our family and their relatives.

With Wednesday’s spectacular reversal from the lows, it seems the Family has put back on their swimsuits. Semiconductors, the star of this week, began by holding the July 27th low and closing green (not the bad algae kind).

Big Bro Biotechnology, reluctant to get wet the other day (smart boy), on Wednesday he slathered on waterproof sunscreen.

Granddad Russell 2000, if he can hold back over 120, will put on nose plugs and head to the diving board. Grandma Retail, she’s nobody’s fool; she will dip in to her waist, but not go all in unless she gets confirmation that it’s safe on Thursday.

After the pressure of having to live up to his Prodigal Son status, the Regional Banks remain more cautious. Transportation, will follow Granny as she often does. Trannies will look for XRT to recapture the 200 DMA.

If one synchronized swimmer drowns, do all the rest have to drown too? Steven Wright

S&P 500 (SPY) Yet another phase change unconfirmed to a warning phase making 207.59 the 200 DMA pivotal.

Russell 2000 (IWM) 120 is where it all began and now a pivotal area for Thursday

Dow (DIA) Back in 2008, after the death cross in the SPY, the price was way beneath the 2 moving averages and rallied back to them for a great short opportunity. Good to watch for a move to around 177.50-178 for same. But first, let’s see if it can clear 174.44

Nasdaq (QQQ) Even more seriously, this is defending the 50 DMA like an Olympian swimmer.

XLF (Financials) Only 12 phase changes thus far this year. Almost held in a bullish phase with 25.00 pivotal.

KRE (Regional Banks) Closed just above 42.74 the July 6-month Calendar Range low

SMH (Semiconductors) Spectacular comeback if holds 51.00

IYT (Transportation) No longer a possible head and shoulders formation. However, the bottom remains in place

IBB (Biotechnology) Much more stable as far as phase changes, but currently holding in a warning phase

XRT (Retail) 96.88 the 200 DMA to clear

IYR (Real Estate) Inside day over 75.20 and looking strong.

XHB (US HomeBuilders) Near 2015 highs which looks inevitable to clear with a 7 month consolidation

GLD (Gold Trust) Maybe its bottomed, but if rates do firm, wonder if this is where one should have money?

SLV (Silver) Unconfirmed phase change to recovery

GDX (Gold Miners) Like this better than GLD but now a bit overbought