The Stock Market’s Smug and Chubby

November 12, 2019

Mish's Daily

By Mish Schneider

blankInvestors have gone from fearful of a recession to fearful of missing out on this rally.

Yet the economic Modern Family sectors suggest that a FOMO environment may not be rational.

Trump’s remarks to the Economic Club of New York earlier today

criticized the Federal Reserve for not going closer to zero interest rates and then at the same time touted the U.S’ strong economy.

Furthermore, comments on the trade deal with China engendered a response from the China Global Times that Trump “lied.”

That sent the Dow into red territory and took the wind out of the rally sails of the other 3 indices.

Yet even long before Trump’s remarks, the Russell 2000 IWM has failed to clear last week’s high or break last week’s low.

Despite the S&P 500’s journey to another new all-time high, IWM’s inside week makes it the index to watch.

Also, before Trump’s remarks, Transportation IYT, perhaps the smartest sector of all, never traded green.

IYT closed lower by about .65%.

Sure, our sculpture looks all smug and happy, but notice how his hand touches his heart and his eyes are closed.

As far as recession fears, the possibility remains on the table.

Rather than think like an economist though, all one needs to do is watch the key index (IWM) and sectors, Transportation IYT, plus Retail XRT, Regional Banks KRE, Biotechnology IBB, and Semiconductors SMH.

In IWM, the price action range of last week was 157.81-160.46.

A move under 157.81 that cannot recover, means more selling is in store for the overall market.

On the flipside, a move over 160.46 will look a lot better.

As for the other sectors, they also traded within the range of last week.

Based on what I see in the charts, I still go with the probability of stagflation over recession.

Looking at commodities, gold and gold miners rallied off of support.

DBA, the agricultural ETF and one I have featured many times, cleared the 200-daily moving average.

Sugar futures, a secret weapon indicator of potential inflation rising, also closed green and looks to be basing.

One reason we are not seeing commodities at even higher prices has to do with the strong U.S. dollar and the rise in yields these last few weeks.

However, if I may be so bold, the dollar looks like it could be topping.

The Fed has already suggested that it would consider lowering rates again should the trade war take more of a toll on the economy (The Modern Family.)

Put that all together and you have a few instruments to watch carefully.

The Dollar.
The Rates.
The gold miners (often leads the metals up).
Sugar futures.
The economic Modern Family.

There’s my roadmap for the end of 2019 and into 2020.

If the market does indeed roll over, our smug and chubby figure will clutch his heart and open his eyes.

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S&P 500 (SPY) 307 support. All-time high 309.99.

Russell 2000 (IWM) 155-156 Key support 158 pivotal 160.46 resistance.

Dow (DIA) Made a new all-time high at 278.05 last week. 275 now nearest support

Nasdaq (QQQ) All-time highs at 202.21. 199.75 support.

KRE (Regional Banks) 55.74 July high now pivotal support 57.52 next resistance

SMH (Semiconductors) 134.28 all-time high. Breakaway gap intact if holds 130

IYT (Transportation) 195 support and must clear 200.42 next

IBB (Biotechnology) 109 nearest support

XRT (Retail) 43.92 now the pivotal support. 45.68 May high.

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