These Will Base Quickly and Fly If the Market Holds

January 26, 2016

Mish's Daily

By Mish Schneider

Monkey See, Monkey Do!

After my rendition of “Straighten Up and Fly Right” where the monkey (market) choked (stopped) the buzzard (the selloff), was Tuesday payday?

TLTs, the Interest Rate ETF rose (meaning yields declined) yet again. With the Federal Reserve meeting coming up, many believe the Fed will reverse their decision to raise rates further. Some even believe they will reintroduce Quantitative Easing.

If that’s your trading plan, counting on the Fed, I hope you have a back-up plan as well. Although anything can happen, the Fed has based its rate decisions on two factors-jobs and inflation.

The jobs number is in line with their expectations. Inflation data, although still far from the 2% the Fed wants to see, seems to be a more probable goal as many commodities are trying to base out.

My guess is they word their intentions carefully. Expect something to the effect of they will hold off on raising further until they see what happens with inflation, economic data, etc. but that they are encouraged by recent data and will hold current rates as is.

Why folks think the Fed cares as much about corrections in the stock market I see as wishful thinking. Remember, it was Janet Yellen who stated that the Biotechnology sector was bloated. Look at Big Bro (IBB) now!

We shall all know soon enough.

A while ago I listed bullish mega trends to watch. Two included video gaming and solar. Both have star performers and duds.

First Solar (FSLR) is in a bullish phase-star. In gaming, Electronic Arts (EA) also enjoys Bullish Phase status.

The rest in those groups? Mainly in Bearish phases but will base and rally quickly if indeed the market holds. Watch TAN, the Solar ETF as well, which cleared last week’s high during Tuesday’s session.

How are our Modern Family’s (IWM, XRT, KRE, IBB, SMH, IYT) distant relatives doing?

China (FXI), gained but could not recapture the fast moving average or 30.50 level.

Oil (USO) took back the January 10-Day Calendar Range low at 8.64 early on and rallied. I maintain that the day of reckoning between the market and its hyper focus on oil prices will come.

Oh yes, havoc precedes transitions. However, I’m on the side of the inevitable extinction of fossil fuel for the roseate future of clean energy. I hope the market gets there too.

No surprise to my devoted readers I stake a lot (including buying my favorite mega trend stocks) on watching how Granddad Russell 2000(IWM) and throughout 2015 how Prodigal Son Regional Banks (KRE) perform.

KRE has yet to return over 35.81 its January 10-Day Calendar Range low.

IWM although holding 97.51 well (JCRL), may have closed green, but not enough to clear over last week’s highs. It must.

Remember, “A family that stays together tells us direction with the clarity of a high performance navigation system. Division among the family, and the path becomes muddy.”

I’d rather see you sidelined than thinking you are flying straight while finding yourself crashing into the mud. This market takes both skill and discipline.

I must leave for the rest of the week due to a serious illness in the family. Geoff Bysshe and Jonathan Griffin will be here to deliver the daily until I return on Monday. Peace to you all.

S&P 500 (SPY) 185.52 the JCRL to hold. Cleared 190 now has Friday high to break above. Not seeing amazing volume at this point on the buy side

Russell 2000 (IWM) 101 pivotal now with 105 huge overhead resistance at 97.51 support

Dow (DIA) Needs to hold 158.23. Cleared 161 and Friday high. Rather say 161 if holds is best rather than try to figure out where it might rally to

Nasdaq (QQQ) in holding pattern until the reports come out in the FANG stocks. Except Netflix which already reported

XLF (Financials) Back over 21.13 the JCRL with an inside day. Fed results will move this for sure

KRE (Regional Banks) Inside day. Needs to clear 35.81 or trouble

SMH (Semiconductors) Over 49 better and 47.60 support to hold

IYT (Transportation) If this sector holds up over 120 area that is encouraging. 125 level big resistance

IBB (Biotechnology) 273.47 is the JCRL. 290 clearance could be a game changer.

XRT (Retail) 42 resistance

IYR (Real Estate) 70.85 level support to hold and see lots of resistance above right now

GLD (Gold Trust) Been long here for a while now. Like it going up with market, like it rallying when market is crashing. I guess I just like it.

SLV (Silver) Stopped at the December 4^th high 13.94 (slightly below). Needs to clear that and then 14.00

GDX (Gold Miners) Unconfirmed recovery phase. Must hold 13.75

USO (US Oil Fund) 8.64 support to keep this up