The Yellow Jacket and the Ant: A Market Legend

June 16, 2019

Mish's Daily

By Mish Schneider


blankThere is a Nez Perce tribal legend about the Yellow Jacket and Ant.

In the legend, the ant invades the living space of the yellow jacket because he sees that the bee is eating salmon.

The ant, becoming jealous, starts a fight with the bee.

The ant exclaims that he has the same rights as the bee and should also be enjoying that salmon.

The bee calls the ant a runt. That enrages the ant, so he climbs up to the fight the bee.

Now ants fight to the death. However, as the bee and the ant are going at it, a coyote hears them and orders them to stop fighting.

After the third warning, the coyote turns them both into stone.

Thereby, the yellow jacket and the ant stand eternally in stone as a reminder of what greed does.

Can you guess how this Native American legend applies to the current market?

The market is like the yellow jacket.

Happily feasting on salmon, many stocks have gone to new all-time highs. The S&P 500 is only about 5% away from its all-time high.

It just wants to be left alone.

The ant is like the Central Banks and Federal Reserve.

Jealous of the yellow jackets eating salmon, the banks plan to invade the markets dinner by injecting more artificially low interest rates.

They not only want to feast on salmon, they want to get credit for providing it.

Furthermore, the banks do not like being called runts.

Now ants can lift 20 times their own body weight.

However, can the Federal Reserve and Central Banks do the heavy lifting of the market?

With mixed economic statistics reported this past week-jobless claims up while retail sales gain, it all sounds a bit greedy to us.

After all, when the coyote (whom we can say represents reality) comes along and sees the market and the banks fighting over liquidity, he could turn them both to stone.

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S&P 500 (SPY) Until it closes over 295 look out for weakness. Key support areas are 293.50 and 291.50

S&P 500 (SPY) 287.00 the 50-DMA is super pivotal. And must clear 290 once and for all.

Russell 2000 (IWM) 152.75-153.35 is where the resistance lies. 151.65-the high 2 weeks ago-is pivotal. Support at 150.75

Dow (DIA) 260.06 the ever so important pivotal level. 262.87 the high to clear

Nasdaq (QQQ) 183.59 the 50-DMA it needs to clear. And, 179.75 support.

KRE (Regional Banks) 51.40 support.  Overhead resistance at 53.50

SMH (Semiconductors) 105.50 resistance. 103 pivotal. 101 support

IYT (Transportation) Must clear 190 to look good. 186.75 pivotal. 185.50 support then 183.50

IBB (Biotechnology) 103.15 pivotal.

XRT (Retail) 42.37 the major resistance with now, 41 pivotal and 40.00 big support

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