The Dow at 25,000-Birthed This Year of the Earth Dog

January 4, 2018

Mish's Daily

By Mish Schneider

On December 4^th I wrote: The last time I used Terror in the Dow was from the Twilight Zone episode when William Shatner sees a gremlin on the wing of the airplane he’s flying in.

That was when the Dow tried for 18,000.

Investors got super bullish as the Dow tried to clear 18,000.

Yet, each time that level pierced, it could not hold for very long.

By August 2015, the gremlins forced a crash landing and the Dow fell to 15,370.

It took nearly one year more for the Dow to try 18,000 again.

Here we are in January 2018. The Dow pierced 25,000. Thus far, no gremlins on the wing of the plane causing terror.

However, besides the birth of a new Dow Jones Industrial Average level, we also have the upcoming birth of a new Chinese Astrological Year…

The Year of the Earth Dog.

“When the year of Dog arrives, the fire enters the grave, hence it brings setback to optimism, which in turn will cause setback in the economic atmosphere.” Raymond Lo

I will write a lot more about this in the coming weeks. For now, suffice to say that we have had 5 years of fire as the ruling element (Fire Rooster still in play). This year, the element switches to water.

And our dog is just a puppy.

Why does that have the power to ignite Terror in the Dow at 25k?

Recently, I have written about higher interest rates and a lower US dollar and the potential implications for hyperinflation and an economic slowdown.

With NFP tomorrow, doubtful we will see any signs of an economic slowdown. However, we could see a boost in interest rates. Without wage increases (we have yet to see evidence of any) the dollar could fall.

Plus, global demand has boosted commodity demand-possibly more inflationary down the road.

I have written about an overheated economy and how the tax reform could have an initial positive impact-obviously-yet in the long run, could fizzle out.

Today, the AAII survey shows that individual investor sentiment is “outright gleeful.” The market has the fewest bears since 2014 and the most bulls since 2010.

Furthermore, only a tiny percentage of Americans benefit from this move in the Dow. A record high of 30% of households have no wealth. “The wealthiest 10% own nearly 90% of stocks, the highest such ratio since 1983.” MarketWatch

The wealth disparity, with any economic downturn, could prove socially disastrous, which would certainly give our earth dog something to whine about.

And, I have written about finding autonomy in your trading decisions by using the Modern Family sectors and index to make your own “predictions”.

While the Dow, S&P 500 and NASDAQ all made new highs, the Russell 2000 (IWM) did not.

This scenario also supports what happened in 2015. IWM did not make new highs while the other indices did.

Yet, Transportation remains strong. Semiconductors, a long way from new highs, gained. Regional Banks did as well but did not clear 60.00

Granny Retail and Biotechnology weakened, but did not violate any major support levels.

Consequently, how can anyone argue that our earth puppy is not the cutest thing and very tempting to cuddle.

Nevertheless, carefully watch the Dow or DIA at 250. Should that level begin to falter, our adorable puppy can turn into a gremlin.

Note: Last Daily that analyzes all the Sector ETFs. Starting over the weekend, only the four indices will be covered. To receive the analysis on the sector ETFs, you are invited to join Mish’s Market Minute Advantage https://marketgauge.com/trading-ideas/mishs-market-minute-advantage/

S&P 500 (SPY) New highs. 268.25 pivotal support

Russell 2000 (IWM) Through 155 should go higher, especially on a closing basis. Under 153.50 trouble

Dow (DIA) Runaway gap if holds 249.22. If it doesn’t, expect some trouble at 25k

Nasdaq (QQQ) 160 pivotal with 157.70 support

KRE (Regional Banks) 59.00 pivotal support through 60 good

SMH (Semiconductors) Confirmed bullish phase-100.84 pivotal and a distance to the highs near 106. Not sure it can make it

IYT (Transportation) 194.25 support to hold to possibly see 200

IBB (Biotechnology) 109 support to hold then 107.50. Through 112 could see 113.74-114

XRT (Retail) Failed 46.00 but no real damage done

IYR (Real Estate) Unconfirmed distribution phase

GLD (Gold Trust) Filled the gap to 125.41 so appears this still looks good.

SLV (Silver) 16.27 the 200-week MA. 15.85 support