Thee I'll Chase Hence, Thou Wolf In Sheep's Array

February 23, 2015

Mish's Daily

By Mish Schneider

1^st Part of Henry The Sixth- Shakespeare

Clearly some of you are expecting me to write about the inside days in the indices (when the trading range of the current day is inside the trading range of the day prior), comparing the pause/consolidation/hesitation to our peaceful, grazing sheep metaphor.

In fact, one of my twitter followers even wrote me earlier to mention that the action on Monday was like “Watching grass grow!”

Goading (or is that goating) me on, eh?

I’d rather begin this week by focusing on Interest Rates TLTs, Commodities (particularly gold GLD, silver SLV and oil USO) and the Volatility Index as all but oil rallied suggesting we shepherds need to stay frosty in our persistent search for wolves.

I do maintain that dips represent buy opportunities in the indices considering the bullish phase, price above January ranges, digestion near the highs etc.

Yet, with various concerns popping up, we must stay vigilant, prepared for anything. Or, at the very least, consider hedges on long positions whilst the market figures “it” out.

What is “it”? The Russian ETF (RSX) for starters has a lot of room down to 16.00 and can still look okay. However, I do not see that sort of move having a warm reception by the US Indices. The Greek ETF (GREK) also moved down yet, after Friday’s huge bar, fits the “inside day” definition.

Rates or TLTs dropped from 138.50 to 126 in 2 weeks. A 50% retracement move now that they took out 128, points to a move up to 132. This is on the heels of Janet Yellen’s testimony, which begins Tuesday into Wednesday.

With lower rates, GLD hung in there with 116.90 the real resistance to clear before we call this latest action anything other than noise. SLV beckons to me a wee bit more as a move over 16.05 will give us a chance to see if the return to a Recovery phase can stick.

Finally, the Volatility index VXX, given the aforementioned concerns, paints a somewhat sobering picture to start the week with the recent Golden Cross, although trading in a Distribution Phase (price under the moving averages.) One push over 30.05 will be worthy of a bull’s respect.

“In things a moderation keep; Kings ought to shear, not skin, their sheep.” Robert Herrick

S&P 500 (SPY) Inside day near the highs.

Russell 2000 (IWM) Really nice close on the highs with an inside day

Dow (DIA) Inside day near the highs

Nasdaq (QQQ) AAPL is the gift that keeps on giving-we took our 1st partial profit from a long at 120. I mention this for how a swing trade looks

XLF (Financials) 24.90 the January Calendar Range high, and back to waiting for 24.37 to clear

KRE (Regional Banks) 41.06 the January Calendar Range High to clear

SMH (Semiconductors) Inside day

IYT (Transportation) 165.17 January high

IBB (Biotechnology) Steroids

XRT (Retail) New highs intraday but closed just under Friday’s closing price

IYR (Real Estate) Holding the 50 DMA finding relief from the ease in rates