The Market Throws the Cane of Caution to the Wind

February 15, 2018

Mish's Daily

By Mish Schneider

blankThat’s me in costume, dressed as an aging silver baroness, who sits on park benches waiting for young folks to come along.

The bull market, also in costume, is aging as well.

And hoping to captivate young folks into buying near the highs.

In fact, I recently read that there was a surge in the number of new trading accounts that opened in January 2018.

Typically, the public buys the highs and sells the lows.

Also typically, the young tend to humor elders rather than listen carefully.

So, young and old, if I have your attention, does this week’s action suggest the market is going back to the January highs?

In the play, my character gets up to perform for the young couple, “I Can’t Say No” from Oklahoma’s soundtrack.

As she sings, she forgets about her need for a cane and tosses it aside to do some chorus-girl style kicks.

The song begins, “It ain't so much a question of not knowin' what to do; I've know'd what's right an' wrong since I've been ten!”

In that spirit, is it right to be buying up here in anticipation that the market throws its cane of caution to the wind?

The positives:

Semiconductors and Biotechnology confirm the bullish phase. The S&P 500 goes into an unconfirmed bullish phase, along with the Dow, Granny Retail (XRT) and Crude Oil.

NASDAQ 100 continues to make strides to the upside and leads the charge.

All the monthly channel lines that instruments broke out from, have been retested and held.

These positives, if they continue, should result in those motivated late January buyers convincing their friends to buy.

FOMO or fear of missing out.

The negatives:

The Russell 2000 has more to do to make it to its 50-daily moving average at 153.73. Transportation’s (IYT) 50 DMA is even further away at 193.70.

Two essential Modern Family members are dragging their feet, unlike our stimulated Granny Retail.

Rates held firm, dollar fell further. Inflation talk, all of a sudden, is positive for the market. But is it really? If grains take off, now that the metals have started to, the cost of living could outpace the nominal wage growth.

And rates will go higher. The dollar will be worth less while it costs more to borrow money.

Corporation buybacks may not care as much with the tax cuts filling their till. But, corporations need consumers to spend money.

So, as the market climbs higher consider this,

“I'm jist a girl who cain't say no,

I'm in a turrible fix

I always say "come on, le's go"

Jist when I orta say nix!” I Can’t Say No, Oklahoma.

S&P 500 (SPY) 271.75 is the 50 DMA resistance and now pivotal number to confirm or deny the bullish phase.

Russell 2000 (IWM) Under 151.40 will engender caution. Otherwise, this has a lot of catching up to do.

Dow (DIA) So we are back over 25,000. Are the gremlins back asleep? 251.47 the 50 DMA pivotal number

Nasdaq (QQQ) It seems it will need a lot of buyers to push through the major resistance at 167-168. It’s major.

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