The Market Lives, Dies and Lives Again!

September 22, 2016

Mish's Daily

By Mish Schneider

Some might see a bunch of apples that have fallen off the tree left to rot on the ground. Others might see a bunch of beautiful wildflowers fertilized by the same soil the apples grew from.

The market is an equal mixture of vibrant wildflowers and dying apples. That’s just the way it is.

Favorite tweet I saw today, “ One day, this will all end badly.” I chuckled when I read that. First I thought, yes, a broken clock is right twice a day. Then I thought, yes, the sun will come up and then go down tomorrow. Nevertheless, this market does continue to provide a level of satisfaction for both optimists and pessimists.

Which are you? Which am I? If you find yourselves fluctuating between both optimist and pessimist throughout the day, week or month, you are not alone. Or nuts. Or a lousy analyst.

Yet, how are your trading results compared to your favorite benchmark? Depending upon that answer, you might have to look again at the photo above.

Check out the volatility (fear) index. It just about matched the all-time low. Not so scary a time as the media would suggest.

The areas that suggest pessimism are those that I have been writing about a lot. At the top of the list, Retail and Regional Banks. Running second, Biotechnology.

The areas that suggest optimism I also include here nearly every day. At the top of that list, Technology and Semiconductors. Running second, Metals and Metal Mining.

I find myself repeating a chicken/egg theory. Will the leaders pull up the laggards? Will the laggards drag down the leaders?

Should we just forget all that and accept that the market is and will continue to be divergent and that’s ok?

What I found particularly encouraging today is the buying that came in at the daily lows in the indices. With the S&P 500 (SPY) dancing on the 50 daily moving average, it tested the ETF’s bullish resolve and won. Now it needs a second day confirmation.

Both wildflowers and apples need fertile soil to grow. They both need water and sunlight. They both harvest and blossom at different times. And, they both live and die and then live again.

If you are not satisfied with your P&L results, perhaps you need a reminder that the whole is equal to the sum of its parts. Cycles are part of nature and the market. Sectors also live, die and live again. Your portfolio should reflect rather than lament the market’s diversity.

S&P 500 (SPY) Needs to close a second day above 216.94 to confirm the return to a bullish phase

Russell 2000 (IWM) 124.50 now pivotal. Could see 129-130 next

Dow (DIA) Has yet to clear back over into a bullish phase

Nasdaq (QQQ) Runaway gap? If today’s low holds yes.

KRE (Regional Banks) 41.30 the 50 DMA to defend and need to see it clear 42.30 area

SMH (Semiconductors) Another new high but not nearly as pretty as NASDAQ

IYT (Transportation) 144-146 the resistance to clear

IBB (Biotechnology) 300 pivotal

XRT (Retail) Still need to see a move over 44.17

IYR (Real Estate) Another sector that needs to play some catch up

ITB (US Home Construction) 28 important level to clear

GLD (Gold Trust) Confirmed bullish phase