October 25, 2015
Mish's Daily
By Mish Schneider
Bulls and Bears Win
With Halloween just around the corner, our Modern Family has been brainstorming which costumes best reflect the recent division among the members.
If you are new to this daily, last week I traversed everything from nursery rhymes (The Farmer in the Dell) to an American colloquialism (Shotgun Weddings) to try to help make sense of the market’s extraordinary action.
NASDAQ took Semiconductors as its bride. Semiconductors, although male, became pregnant with a market rally. The couple, instead of eloping, invited the rest of Semi’s family (Modern Family,) to a shotgun wedding. As of the end of last week, QQQs and SMHs were waiting for the Family’s RSVPs.
At the conclusion of the Farmer in the Dell, the cheese stands alone. We anointed the Federal Reserve as the cheese since the next direction of interest rates stands as a possible sea change.
Then, a surprise came when Draghi or the Italian cheesemeister, declared the ECB will buy more bonds beginning in December.
Later that night, while the US slept and China markets awoke, China cut rates as well. With a wedding banquet featuring cheese as the hors d'oeuvre, compliments of Europe and Asia, even without any domestic cheese offerings (Yellen and crew), the US markets rallied more.
Back to the Modern Family, the Wedding and Halloween
Last 2 weeks, if you follow me on twitter, I recommended 3 short trades that dropped really hard, well underperforming the market. (Solar City, United Amour and Walmart).
In fact, although I recommended a few longs as well, unless you were in the NASDAQ 100 leaders into earnings or certain Semi’s after the Intel report, those picks ran up but not nearly to the same percentage as the shorts that fell.
The perfect Family Halloween costumes reflect those dichotomies-Bulls and Bears.
Granny Retail (XRT) is definitely a Mama Bear. She ain’t buying and she ain’t going to the wedding at this point. Granddad Russell 2000s is Papa Bear but more like a sweet Winnie the Pooh bear, since it’s over the 50 DMA.
Semi’s Bull. Prodigal Son Regional Banks (KRE) Bull. Big Bro Biotechnology (IBB) Bear, though still thinking about crashing the wedding. Transportation (IYT) Bull but adding a dancing bear tutu skirt to the ensemble. Also considering going as Goldilocks.
As we head into this week, interest rates remain a major focus. The strong US dollar and Commodities also make the list, given evidence of El Nino’s impact and Hurricane Patricia.
As far the shotgun wedding and the family RSVPs, that’s the sort of drama that will make this Halloween a real trick or treat!
S&P 500 (SPY) Over 206 and therefore not only the new level to hold but also an unconfirmed phase change to Accumulation
Russell 2000 (IWM) Confirmed return to a Recovery Phase with 116 just within reach
Dow (DIA) Over 175.62 the 200 DMA and therefore not only the new level to hold but also an unconfirmed phase change to Accumulation
Nasdaq (QQQ) 114.39 is the 2015 high. Think we will see it?
Volatility Index (VIX) Strangely closed green which tells me I’m not alone feeling scared of this paranormal rally.
XLF (Financials) Closed just shy of 24.20 the 200 DMA
KRE (Regional Banks) Cleared 42.72 the 100 DMA now the area to hold
SMH (Semiconductors) 57.40 good target55.50 pivotal
IYT (Transportation) September 17th high 149.86. Friday high 149.82
IBB (Biotechnology) Over 320 will look so much better
XRT (Retail) Looks skeletal. To get meat on the bones needs to clear 46.46 last week’s high
IYR (Real Estate) Could only get one close over 76.00.
ITB (US Home Construction) A close over 28 gets me interested
GLD (Gold Trust) Subscribers: Keep a mental stop of 112.15 to get long with a stop under 111
SLV (Silver) Like over 15.19 if holds 15.00
GDX (Gold Miners) GDX needs to clear 17.00, but looks like it will
USO (US Oil Fund) Held the recent trading range lows at 14.14
XLE (Energy) Over 69.70 looks great
TAN (Guggenheim Solar Energy) If oil prices stay low so will this have trouble going up much more
TLT (iShares 20+ Year Treasuries) Sitting on the 50 DMA. Better over 124.60
UUP (Dollar Bull) Express from an unconfirmed Recovery phase to an unconfirmed Accumulation Phase. 25.20 the 200 DMA
EWI (Italy) Like the compression over the 100 DMA and Friday’s inside day
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