February 21, 2017
By Mish Schneider
In 1964, Ken Kesey dubbed a bus “Furthur.” “You’re either on the bus or you’re off the bus,” became the metaphor the then Merry Pranksters used during their cross-country tour.
In what some might dub as the psychedelic cross-country market rally, many investors feel similarly. They are either on or off the “Furthur” bus.
Those investors “off the bus” now find themselves experiencing a bummer trip. Prices have extended to a point where the amount of risk versus the anticipated amount of reward is skewed.
Those “on the bus” are still tripping.
Meanwhile, an interesting phenomenon is occurring.
A plethora of market analysts spend a great deal of time finding reasons for a market top.
Of course, that always happens-countertrend traders, contrarians, doomsday prophets, etc. are part of the nature of the market beast.
Yet, consumer confidence from the University of Michigan shows optimism is still sitting near 13-year highs.
What evidence might we have that peak optimism is approaching?
One anomaly in support of a possible peak- while corporate earnings estimates for 2017 have fallen by 1 percent since the election, the S&P has surged 10 percent.
Buzz from heads of investment groups who seek details emerges. Many have become vocal that to date, Trump has only suggested his policies would be unveiled soon. Where are those policy details?
More evidence of frothy conditions-Some infrastructure stocks that peaked in late January are now beginning to fade. Stocks like Vulcan Materials (VMC) fell from a January peak price of $136.82 down to $121.50 today.
However, Amazon, Apple, Applied Materials, Costco all made new all-time highs. NASDAQ, the DJIA, Russell 2000 and the S&P 500 did as well.
From a technical standpoint, the Russell 2000 reached the top of a monthly channel line or what we tech folks would consider an inflection point (140.00-140.50).
With only one week left in February, that could turn out extremely helpful-whether that point fails or clears.
For now, the market continues its Magic Trip or “Magical Mystery Tour” if you will. Until the Electric Kool-Aid wears off. Or until those “off the bus” clamor to get on.
S&P 500 (SPY) 240 still in focus with 232.40 support
Russell 2000 (IWM) 139 is the pivotal number to watch end of month
Dow (DIA) 204 big support
Nasdaq (QQQ) Closed on new all-time highs.
KRE (Regional Banks) Room up if thinks Fed will tighten. 56.75 support to hold
SMH (Semiconductors) Yep, another new high
IYT (Transportation) Not on new highs yet so worth watching to see if it takes a bigger role in the whole picture
IBB (Biotechnology) 285-287 pivotal support.
XRT (Retail) Stopped just short of the 50 DMA which means good to watch tomorrow
IYR (Real Estate) Cleared the 200 DMA and unconfirmed accumulation phase
GLD (Gold Trust) 116.05 max risk. 117.50 pivotal
SLV (Silver) 16.90-17.00 key support
USO (US Oil Fund) 54.00 cash levels should hold or around 11.40
TAN (Solar Energy) 19.00 resistance
TLT (iShares 20+ Year Treasuries) 118 lower support with 120 pivotal
UUP (Dollar Bull) 25.80 support 26.25 resistance
FXI (China) Still looks good
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