June 15, 2016
Mish's Daily
By Mish Schneider
Photo by Mish
“The Biggest Thing Since Creation!” describes the worldwide negative interest rate policy. Most certainly we can say that the relentless “Giant Behemoth” has traders adoring the fiction yet fretting the reality both at the same time.
The film in the poster is a 1959 American-British black-and-white science fiction co-production. Doesn’t that make you think there’s more than just a little correlation between what the market did today with no Fed action and what it might do next week once the Brexit verdict is in?
The film has a message. About the dangers to marine life from nuclear testing, it follows the story of a fisherman, who after a lethal dose of radiation mutters his last word “behemoth.”
What message can we surmise from the Fed’s inaction and the looming threat should England leave the E.U?
We’ve had many doses of the Central Bank’s policy of lowering interest rates, which brings us to our current situation--a little room to lower more (US can still go back to zero from .25%)--at the risk of igniting lethal inflation.
Furthermore, the point of keeping rates at historical lows could very well turn out as moot.
Some predict a 10-15% drop in equities should Brexit occur. We make no predictions. However, we do remind you of the dangers to life as the Modern Family knows it (bullishness since 2012) that could make the market look like washed up, dead marine life.
The Russell 2000 has the most room to the downside before deteriorating in phase from bullish to warning. That’s a plus.
The S&P 500 has way less room between the bullish and warning phases. By the end of the session, SPY teetered on the 50 daily moving average. The Dow and NASDAQ are already in warning phases.
Transportation (IYT) had an inside day (traded within the range of yesterday’s trading range) and looks somewhat radioactive
Biotechnology IBB and Retail XRT holding above support, never really gave the bulls reasons to be cheerful.
Semiconductors SMH, the strongest sibling, seems more likely now to see 54.50 than 57.50
Regional Banks KRE also had an inside day but sadly, confirmed the bearish phase.
All that with the TLT’s closing near the all-time high close from December 14, 2015 (135.87).
At the end of the Giant Behemoth, scientists propose a way to administer a lethal dose of radium to the behemoth. They hope to accelerate the radiation sickness that is already slowly killing it. Firing a torpedo into the monster's mouth, the Behemoth roars in pain and dies.
Can the scientists that created negative interest rates and in essence this Behemoth prevent a market disaster?
S&P 500 (SPY) 207.75 is the 50 DMA and pivotal. Then, it could test weekly support levels at 202.50. Over 211, way better
Russell 2000 (IWM) 112.50 level important. 115 pivotal and over 116.50 impressive
Dow (DIA) 177.80 the 50 DMA to clear or fail from.
Nasdaq (QQQ) Holding 107.50-107.75 support. If good, has to close back over 108.40. Otherwise, can see 106.89 to 106.25 next.
Volatility Index (VIX) Held the 50 DMA. Decent hedge should things get ugly.
XLF (Financials) Confirmed distribution phase. Under 22.40 expect more weakness
KRE (Regional Banks) Confirmed bearish phase with support at 38.20
SMH (Semiconductors) 54.50 support or a move over 57.20 a relief
IYT (Transportation) Seems this will retest the 200 week moving average at 132.26
IBB (Biotechnology) 260 support with 272.50 resistance
XRT (Retail) Granny has 40 to defend and over 42-good for her!
IYR (Real Estate) 78.00 big support and over 80 new life
ITB (US Home Construction) Holding 26.55 area so still has a shot
GLD (Gold Trust) 123.96 recent high to clear
SLV (Silver) 15.75 support with overhead at 17.00 then 19.00
GDX (Gold Miners) 25.55 pivotal area with today’s multi-year high close
USO (US Oil Fund) 11.25 the 50 DMA. 2 days it couldn’t get through 11.80 which makes that a key point to clear if good
XOP (Oil and Gas Exploration) Holding the 50 DMA
UNG (US NatGas Fund) 7.40 a good point to use for a stop.
TAN (Guggenheim Solar Energy) 20.00 -maybe not so cheap
TLT (iShares 20+ Year Treasuries) 135.35 pivotal on a closing basis
UUP (Dollar Bull) Confirmed return to a recovery phase
FXI (China Large Cap Fund) After a good try, could not close over the 50 DMA. Maybe tomorrow
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