The Truman Show

June 9, 2015

Mish's Daily

By Mish Schneider

The exodus out of the 20+ Year Long Bonds really throughout 2015 but mainly over the last several weeks, has economists, investors and active traders alike wondering whether the Federal Reserve has a master plan or has no master plan and is merely losing control.

Does the Fed plan to raise rates, leave the interest rates status quo, make the market super nervous, and then surprise with a new injection of easing?

As your humble narrator of our Modern Family who drives a minivan seeking to have fun and travel to distant places, I am now considering that like the film, “The Truman Show”, the reality I constructed of the Family in a giant Sheep Pasture actually resembles that film’s constructed reality of a giant artificial, arcological dome.

The Federal Reserve might have begun as the in-charge Producers of The Modern Family Reality Show, but as the relationships among the fledgling economic recovery, low interest rates, rising US dollar and zero inflation have become harder to read or predict, the Family, like Truman, is beginning to notice certain aspects of what’s supposed to be their near-perfect world changing.

The Russell 2000 or what we anointed as Granddad continues to hold up better than the other indices. However, like Truman, that index is becoming more and more aware of the abnormalities within the other indices as they all are now in confirmed warning phases. In the middle of the trading range, the Russell’s closed Tuesday marginally in its Bullish Phase.

Retail confirmed the warning phase trading near the lower end of the 2015 trading range. Semiconductors fared better, however unless they crack above the 50 DMA, we can look at the green close as nothing more than a relief rally after the huge decline.

Biotechnology has a better chance of helping ameliorate the Family’s fears as it is above the 50 DMA and not too far from the recent highs. But it has to make its move soon. Transportation, despite the family’s best attempts to reassure that sector, has made no real impact other than temporary respites.

Regional Banks, just as in the film, is speaking directly to the family through a powerful sound system trying to persuade the others to stay. But even with the new highs posted on Tuesday, one has to wonder if there is no more truth in its real world than in the Modern Family’s artificial one.

The Federal Reserve has an unenviable job as Producer. Has the Bull Run all been fiction masquerading as fact?

Come on Fed, help us and the Family still believe in your optimism that the dome is real!

S&P 500 (SPY) If this is to hold has to clear Tuesday’s high and the 100 DMA. If not next stop is 204.70.

Russell 2000 (IWM) 125 resistance, under 124.00 can see 122.65

Dow (DIA) Getting oversold near the lows of the 2015 trading range

Nasdaq (QQQ) Needs a close over the 50 DMA to keep us from seeing the potential double top

XLF (Financials) 24.95 the point to clear with 24.45 the 50 DMA

KRE (Regional Banks) New 2015 highs.

SMH (Semiconductors) 56.00 support and over 56.75 so much better

IYT (Transportation) New low for 2015.

IBB (Biotechnology) Maybe the blast off in Eli Lilly (LLY) at the end of the session will help this remember why I call this group Big Brother

XRT (Retail) Granny’s buckling. Only a move over 100 will save her.