October 28, 2018
By Mish Schneider
Avalanche victims allegedly drank the brandy in the St. Bernard’s barrel to say warm while they waited for rescue.
After this past week, I am sure many market avalanche victims did the same.
The dog is of course, the brown earth dog, or the symbol in the Chinese New Year for 2018-2019.
And he comes not only with whiskey, but with water-as in a forecast of a water element yielding 5 years of a bear market.
Of course, I always take these astrological warnings with a grain of salt.
However, given how the past week ended, even a brandy-carrying St. Bernard offers little relief in this avalanche.
Sadly, the S&P 500, NASDAQ 100 and the Dow all closed under their 50-week moving average for the first time since either Spring or Fall of 2016.
Transportation, Semiconductors and the Russell 2000 closed under their 23-month moving averages. Granted, the month is not over yet.
With Halloween a fitting end for this month, should we plan to trick or treat in a St. Bernard costume?
Familiar readers know that I have been carefully watching the 100-year low ratio between equities and commodities.
Here is an update.
The U.S. dollar is a key component. On Friday, right after the GDP number came out, the dollar rose to a new 2018 high.
Then, it proceeded to sell off closing with what looks like a bearish engulfing pattern.
Should this confirm, what is already starting-the rise of commodities beginning with oil-will continue.
Furthermore, the Fed may be forced to hold back on a December raise in rates. Nonetheless, any softening of the yield is also good for commodities.
No amount of brandy will help those stuck on equities. Lower rates and a lower dollar will be seen as a negative for the market.
Folks have asked me what they should watch.
My short list:
USO for oil. GLD for gold, DBA for agriculturals, DBC for a combo of oil and metals. And USCI for a general US Commodity index look.
S&P 500 (SPY) 257.83 the 23-month MA next support. 274.50 the best overhead resistance
Russell 2000 (IWM) To say something good-if this holds 144.70 and clears 150-could be the start of a rally.
Dow (DIA) 250 now resistance
Nasdaq (QQQ) 153.56 the 23-month MA support. 169.50 the resistance
KRE (Regional Banks) If the market follows this sector’s lead, ouch. 49.59 the 200-week moving average support.
SMH (Semiconductors) Well, at least it closed above the low of the week. 88.73 now support with 93.60 resistance
IYT (Transportation) 180 first pivotal area if holds Friday’s lows. Plus, 180.64 is the 23-month MA-so this could be the market savior if holds.
IBB (Biotechnology) Interesting inside day Friday-needs a quick clearance of 104.69, the 200-week MA as it closed below it
XRT (Retail) 44.50-45.00 big support-still above the 23-month MA.
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