The S&P 500's Journey to Enlightenment

July 14, 2016

Mish's Daily

By Mish Schneider


In past years I focused a lot on the comparisons between the market and the astrological symbols of the Chinese New Year. 2014 was the Horse, a year that saw gallops and bucks. 2015 was the Sheep, a year that the market traded within an 8-month range or massive and relatively peaceful sheep pasture.

This year, the Year of the Fire Monkey, has been trumped by so many other images and metaphors. Until now.

With the new highs and today’s runaway gap in the Dow, along with new highs in the S&P 500 and the Real Estate Sector, hello to our illustrious and gilded Monkey!

According to Chinese Astrologers, the positive characteristics of the Fire Monkey are intelligence, curiousity, optimism and agility. The negative traits include arrogance, recklessness, snobbery and manipulation.

All of the above characteristics defined the market the first half of this year. With a new 6-month calendar range about to begin, how might our monkey play with us the second half of the year?

Borrowing from the sheep pasture, we do begin the second half with a wide trading range to work with in the indices.

The S&P 500 alone has a range from 207.06 to 216.67 (unless we clear that tomorrow.) With nearly $10.00 in just 10 trading days, that monkey has been swinging on some seriously long vines.

Optimistic? Yes. Agile? Definitely! Reckless? Perhaps.

In the Chinese 16th century text Journey to the West, the S&P 500 is like the Sun Wukong or the Monkey King. That makes the Russell 2000 Zhu Bajie, or the Eight Precepts Pig. With an $8.00 range, IWM is a reliable fighter but has caused conflict with the SPY or Monkey King.

Journey to the West is the story of a voyage to enlightenment. The power of virtue and cooperation guides that journey.

Such is the case for the market. In order for the Monkey King to continue leading the rest of the market on the path to further highs, cooperation from the weaker sectors and indices becomes tantamount.

If weaker sectors such as Biotechnology in particular cannot catch up or cooperate, then the market may wind up similarly to the events of 2015. NASDAQ and FANG stocks exploded leaving most other sectors and indices behind. Eventually, NASDAQ had a nasty fall.

That makes July’s 6-month calendar range for all of the Modern Family even more compelling to watch. It seems cooperation among the members (SMH XRT IBB KRE IYT IWM) will go a long way towards enlightenment. Without it, we could see a monkey rebellion.

S&P 500 (SPY) We could say runaway gap here which means it should hold 215.66 today’s low if good

Russell 2000 (IWM) Needs to clear 120.42 for more upside. Super interesting is the 2 inside days at the 2016 highs. Whoa-keep on radar!

Dow (DIA) Better runaway gap if today’s low 184.57 holds

Nasdaq (QQQ) 114.54 the 2016 high-pretty far away.

XLF (Financials) 23.60 substantial resistance it pierced intraday but closed below. 23.20 first line of support then 23.05.

KRE (Regional Banks) 39.85 the 200 DMA cleared and now needs to hold.

SMH (Semiconductors) 60.13 all-time high. Close but no cigar. 57.80 area support

IYT (Transportation) 143 now pivotal. 146.07 the 2016 high

IBB (Biotechnology) 264.85 an intersection of moving averages and support.

XRT (Retail) 43.39 support or Granny could spell trouble

IYR (Real Estate) Resting

GLD (Gold Trust) Long term still really bullish unless fails 125, then only mildly bullish

SLV (Silver) 19.33 the 200 WMA which matters most at the end of the week.

GDX (Gold Miners) Good consolidation near the highs

USO (US Oil Fund) Meaningless noise until it changes the 1-year trend down

OIH (Oil Services) Quiet inside day-good

UNG (US NatGas Fund) Needs to clear over the 50 week moving average once and for all

TAN (Guggenheim Solar Energy) Back over 21.80 better

TLT (iShares 20+ Year Treasuries) An island top would have meant top. Instead, more of a correction especially if holds 138

UUP (Dollar Bull) 25.07 the 200 DMA resistance. 24.70 support

FXI (China Large Cap Fund) 34.60 the 50 week moving average support and 38 resistance

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