September 8, 2016
Mish's Daily
By Mish Schneider
As we awoke today, we saw outside our window this elaborate web built by a Golden Huntsmen Spider.
Our little hunter sat in the middle of the web waiting to trap his breakfast. Like most spiders, they use venom to immobilize prey and to assist in digestion. By the time I came around to take his picture, the architect ran for cover.
Last night, I wrote about another kind of hunter-one who participates in the Trophy Deer Tour and transports those trophies via freight and trucks. Transportation, whether it be to ship sport or essentials, represents a substantial portion of the US GDP.
After an impressive session on Wednesday in the Transportation ETF IYT, despite a down day in the indices, IYT closed green yet again.
Yesterday, we tried to imagine how the Federal Reserve, clearly hot to raise interest rates, might interpret a strengthening transportation sector thus a potentially stronger GDP number.
With IYT’s strength, it seems today the FED became the hunter, spinning a web to trap bulls.
As some bulls became tangled in today’s web the decline in the Long 20+ Year Bonds (TLT) spun, were the bulls merely immobilized rather than digested?
Will, like the spider, the Fed run for cover now that today’s interest rate action has trader’s attention?
Spider webs are elaborate structures. Certain spiders will eat their web and recycle the silk so they can use it again to build a new web.
Like spiders, we have seen the Fed build elaborate webs intimating higher rates are coming. However, we have also seen them eat those words and then recycle them back again.
To avoid getting caught in our own tangled web, I turn once again to the Retail Sector (XRT). Simply put, as part of the GDP, watching Granny can make the difference between becoming the hunter or the hunted.
Interestingly, XRT traded inside Wednesday’s trading range. That makes a price break of the range up or down compelling. A move over Wednesday high should be a good confirmation for more market rally. A break under 44.00, reason to believe the market will follow in kind and trade lower.
Although TLT broke recent support levels, it held the July 21st low at 136.99. On July 22nd, with a big never mind, TLTs roared back. Perhaps we will see that happen again. Nevertheless, I will continue to watch both IYT and XRT as best clues for where rates and the market will head next.
“The spider’s web lets the rat escape and catches the fly.” Spanish Proverb
S&P 500 (SPY) Holding the 10 DMA so not so terrible. Has to clear all-time high 219.60 to keep going
Russell 2000 (IWM) 125.86 July 24, 2015 high before the crash. Holding the 10 DMA at 124.03
Dow (DIA) Still holding the 10 DMA with the 50 DMA just below
Nasdaq (QQQ) 108 resistance to get back over. Held the 10 DMA with today’s low
XLF (Financials) 24.40 the 10 DMA support. Like the hold of the 10 DMA
KRE (Regional Banks) 42.00 support. Through 43.10 better
SMH (Semiconductors) 2 Distribution days in volume. 65.30 underlying support
IYT (Transportation) 146.07 the 2016 high. 144 now underlying support
IBB (Biotechnology) 281 good risk point with a move over 290 better
XRT (Retail) Inside day. Better if clears 44.80 holds 44.00
IYR (Real Estate) After a good 3 day move up, now back under the 50 DMA
ITB (US Home Construction) If clears 30 should continue. Til then 28.38 underlying support to hold
GLD (Gold Trust) 127.60 the 50 DMA pivotal
SLV (Silver) 18.62 pivotal
GDX (Gold Miners) 26.90-27.20 support zone
USO (US Oil Fund) 11.20 the weekly MA to clear-until then noise
XLE (Energy) New 2016 high today.
XOP (Oil and Gas Exploration) Been writing I like this since 35.30. Now, time to consider profits and trailing stops
TAN (Guggenheim Solar Energy) The potential is mind boggling
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