July 6, 2016
By Mish Schneider
Paragliding is a sport in which a wide parachute is attached to a person’s body with a harness. This allows one to glide through the air after jumping from or being lifted to a height.
Might we say the same about the market? Let’s say for example, there is a mountain that is 18,000 feet high. Let’s call said mountain The Dow.
How many paragliders have jumped from this mountain only to make a hard landing 1000 feet below? Will there be a paraglider with a wide enough parachute that can finally soar at or above 18,000 for longer than a few hours?
A Reverse Launch
Although there are several ways to get a paraglider in the air, I choose this method as the one most likely to get the market to the altitude it needs. In higher winds (or volatile markets), the paraglider faces the wing to bring him up into a flying position.
In volatile markets, the investor must also face the wing to resist the force of selling pressure. Ultimately, the paraglider (or the investor) must hold the brakes (or keep the risk) in the correct way. Then he must turn (or trade) on the correct side so he does not tangle the lines.
With the Dow closing on Wednesday at 17,918.62, what sort of reverse launch does the rest of the market need to help get the Dow airlifted?
Granddad Russell 2000, in a Bullish Phase, requires perhaps a forward launch. That’s when there isn’t enough wind so the glider must run forward with the wind behind him to get enough air pressure. The air pressure comes from the forward motion. In market terms, the Russell’s have to rally fast enough to sustain enough movement to inflate.
Semiconductors held steady but chose not to jump. Although the leading sector of the Family, she seems to have concerns about a too fast descent. Therefore, she waits on the sidelines to see if the rest of her crew can successfully soar.
Granny Retail took a surprising chance with a flying lesson or refresher course on what it feels like to take-off on a low, gentle hill. If she feels safe, then there’s a launch waiting for her just slightly above at the 50 daily moving average.
Transportation, no stranger to airplanes, is unsteadied when asked to soar with nothing more than a parachute and a harness. Aware of the risk should poor flying conditions occur, he is a key component the Dow needs to gain the confidence to rise above that 18k mark.
Then there’s the wilder big brother, Biotechnology. He entered an aerobatic competition. Most spectacular for spectators to watch, with IBB’s move over the 50 DMA today and into an unconfirmed Recovery Phase, he performed well.
At last, the Financial ETFs, Regional Banks (KRE) and XLF saw a bid. Although both have more work to do, they found support at last Wednesday’s lows. This could give them the wind beneath their wings plus be the catalyst for the Dow to break a world record!
S&P 500 (SPY) 207.70 is still the pivotal 50 DMA to hold. 210.87 the pre-Brexit high
Russell 2000 (IWM) 116 important level to clear on several time frames. 113.35 the 50 DMA support to hold then 111.50. Under that, prepare for another hard landing
Dow (DIA) 179.83 the pre-Brexit high. 176.80 support then 175
Nasdaq (QQQ) Cleared the 50 and 200 DMAs for an unconfirmed accumulation phase. That makes 107.40 the support to hold. As weakest index, it must clear pre-Brexit high of 108.79.
XLF (Financials) Needs to get back over 23.00 and hold today’s lows
KRE (Regional Banks) Let’s see if it can get back over 37.65
SMH (Semiconductors) 55.00 key support.
IYT (Transportation) 132.90 key support on a weekly basis so for now, I see noise. Must hold today’s lows for a chance
IBB (Biotechnology) Cleared 265.75 for an unconfirmed return to a recovery phase. Needs a second day
XRT (Retail) 42.27 the 50 DMA cleared end of day and now needs to hold for a confirm of the recovery phase. That will help the market a lot.
IYR (Real Estate) Rested
ITB (US Home Construction) Got through 28 which is good
GLD (Gold Trust) See no real resistance until 132. Support 125.90
SLV (Silver) 19.35 the 200 Week Moving Average. It’s a bit overbought but with commodities that doesn’t always mean very much
GDX (Gold Miners) 31.35 the last swing high in August 2013. 28.44 support now. Forgive me as I forgot to mention the runaway gap higher on July 1st.
USO (US Oil Fund) Held 11.00 to the tick and moved up. Now, must get back above 11.60.
OIH (Oil Services) Needs to hold around 28.50 to stay bullish
UNG (US NatGas Fund) Nice when an instrument retraces to the major support, hangs out and then rallies from there. However, until it crosses the 50 week moving average not that impressive
TAN (Guggenheim Solar Energy) Inside day. Maybe over 21.49 will bring in the volume
TLT (iShares 20+ Year Treasuries) Bubble watch goes on.
UUP (Dollar Bull) 25.05 the 200 DMA resistance. 24.70 support
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