The Stock Market Stands in a Precarious Scaffold

September 1, 2019

Mish's Daily

By Mish Schneider

blankOutside our hotel room in Vancouver, I watched this window washer remain extraordinarily calm whilst he precariously stood in his scaffolding 14 stories high.

Incidentally, he also had a bird’s eye view into our room-but that’s another story!

Anyway, we both had fun spying each other for what I’m 100% certain was for very different reasons.

For me, the window washer became a metaphor.

For one, although he hangs precariously, he must trust the equipment implicitly.

In fact, the equipment contains several safety backup features in case.

In the current market, the price action and negative phases in the indices also hang precariously.

The bulls, nevertheless, continue to trust the backup systems or their version of scaffolding through low interest rates, hope for a positive resolution of tariffs and some positive economic statistics.

Also interesting is that the number one danger up on scaffolding is wind.

We could say that the market’s number one danger is another kind of wind-enough said there.

Deaths in window washing are rare because of the safety gear and constant inspections.

Deaths in the market could be rarer if investors used safety gear as well, such as charts and sound trading strategies.

Finally, even with all the safeguards, fear is still a big part of a window washer’s job.

In the market, if you don't feel a bit scared trading, you can make a costly mistake.

That leads me to our best safeguard, the economic Modern Family.


Top left is our granddaddy Russell 2000 IWM. Notice the negative sloping 50-WMA (weekly MA in blue) putting this is in a strong caution phase.

Next to IWM is Regional Banks KRE. Not only is that sector in a strong distribution phase, at this rate, this could be the second sector in the family to enter a bear phase.

Far right is Transportation IYT. Like IWM, it’s in a caution phase. Although there is multiple support at around 174-175, unless IYT can clear and hold over 186, this action is not impressive.

On the bottom left is Granny Retail XRT. That is centimeters away from a death cross (when the blue line or 50-WMA crosses below the green line or 200-WMA.)

With several attempts and bounces each time XRT trades down to around 38.00, a break of that level is not good at all.

Next is Biotechnology or IBB. Notice how our big brother sits just on the 200-WMA.

Last is our sister Semiconductors SMH. The ONLY sector in a bullish phase. Can SMH hold up without participation from the rest of the family?

History has proven no. However, should IWM or IYT find buyers and get through their 50-WMAs and hold, SMH will roar to the upside.

Right now, that scenario looks less likely.

For this week, take heed on the negative phases and the waning weekly charts. Unless that changes, this is a sell rallies market, except for a few stocks trading on their own fumes.

These charts look like the underpinnings of a recessionary period coming to the U.S. If that is the case, we wonder how much the Federal Reserve can do.

Can they serve as a reliable safeguard for a market that stands in a precarious scaffold?

Incidentally, window washing is a male dominated industry although more women are gaining traction. I can certainly relate to that!

Have a wonderful Labor Day. See you all Tuesday.

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S&P 500 (SPY) This cleared 290 which makes that a pivotal number. Should it fail on a closing basis, then bears gain control. 294.25 is the area this needs to clear to continue the rally

Russell 2000 (IWM) 148.00 now key support to hold for this to stay firm. But nothing terribly exciting happens for the bulls unless it clears 152-153.

Dow (DIA) 260 now key support with 266 the 50 DMA to close and hold above

Nasdaq (QQQ) 2 inside weeks., which is significant because it proves the range theory. This must clear 189.50 and close above to continue north and hold 181.50 to avoid going further south.

KRE (Regional Banks) Must hold 49.50 to stay in the game.

SMH (Semiconductors) Confirmed bullish phase.112.70-113.20 is the area this must hold. 115.75 is big resistance

IYT (Transportation) Must hold 179.50. Then clear 186. I’d keep big eyes here as this sector is the key to evaluate the market’s next direction.

IBB (Biotechnology) the 200 WMA at 102.71 pivotal.

XRT (Retail) Possibility this has multiple bottoms around 38 and could run higher from here. It must hold 39.50, and then clear 41.50

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