June 19, 2017
By Mish Schneider
Let’s pretend that the black and gray dog (Havanese) represents relunctant investors. That makes the Aussie puppy the market.
He nudges the Havanese to keep buying the market.
After all, the Dow made a new all-time high and the Russell 2000 cleared back over the fast moving average.
The market wants to play. The more experienced dog has doubts.
Over the weekend I wrote, “…even with the barbed wire gathered in the middle of the trend, traders continue to complacently buy as if there are no obstacles.”
Hence, we have Monday’s action.
Everyone in the Modern Family recovered. NASDAQ and FANG stocks gained.
Although the fear factor factors in no fear, our relunctant dogs of trading have tangible reasons for their ambivalence.
Without suggesting liquidating current longs, why have doubts about engaging in more active play now?
Several events noteworthy to repeat occurred in the last two weeks.
The announcement about Amazon’s purchase of Whole Foods has plusses and minuses.
On the plus side, great for those with busy schedules should grocery stores scan you, your grocery picks, remember them, charge you automatically, then deliver them by drone or driverless vehicle to your home.
Sounds cool enough. Progress, though, comes with a price.
Like Granny brick and mortar Retail XRT, thousands of jobs that will become millions of jobs will be lost.
Online shopping will only grow exponentially. Drivers need not apply.
What does the government do then, if all of a sudden 8 million plus jobs are gone? Training? Provide a safety net?
Then there’s the Fed who turned over a new leaf.
Rather than buying trillions of dollars worth of bonds like they did from 2008, the major focus is cutting the balance sheet. Think the Fed had anything to do with the bull market? Not so much anymore.
Why would the Fed tout higher rates while the treasury 30+ year long bonds remain strong?
Of course the market has yet to really care about any of the aforementioned.
The chance of tax cuts, infrastructure spending, deregulations and growing corporate earnings are the new puppy play.
Insidious factors have equal chances to impact the market. But, speculating on those before they happen seems futile.
Sure, NASDAQ may have had a much better day. Yet it could not clear above 140.60 or the fast moving average. A rally to resistance? Quite possibly.
Semiconductors, also rallied to resistance.
The Russell 2000 may have cleared its fast moving average at 140.70, but the volume not so impressive.
Borrowing a quote, the Aussie says to the Havanese, “I’d gladly pay you Tuesday for a hamburger today.” Let’s see if he lives up to that promise.
S&P 500 (SPY) Through 245 the rally continues. Under 243 suspicious
Russell 2000 (IWM) Monthly channel top at 142-143 level. 140 pivotal.
Dow (DIA) New all-time highs
Nasdaq (QQQ) 140.70 resistance. 138.75 support to hold
KRE (Regional Banks) 56.00 pivotal with 53.75 the underlying support
SMH (Semiconductors) 82.35 the 50 DMA. Has to clear 86.10.
IYT (Transportation) Resistance all the way up to 172.89. 170 pivotal. 168 a key support area
IBB (Biotechnology) Cleared 300 intraday. A start above would be good.
XRT (Retail) Big key to market. If this can take back 40.00 then Friday could be a good reversal day with plenty of volume
IYR (Real Estate) 81.00 pivotal
XLU (Utilities) 53.25 area near-term support.
GLD (Gold Trust) Still like if holds 118 and clears 120
GDX (Gold Miners) I still want to keep a close watch here-have a sense this will rally. Question is when
TAN (Solar Energy) Until this closes a week out over 18.80 not much to say
TLT (iShares 20+ Year Treasuries) 126 pivotal. 127.35 resistance, 124 support
UUP (Dollar Bull) 25.40 resistance and under 25.10 not so good
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