Top Ten Megatrends to Watch in 2016

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First, some follow up from yesterday’s daily: “The most compelling one to watch is Regional Banks (KRE.) Posting a new 60 plus day low early on, and considering this is the week we should find out the Fed’s next move on interest rates, KRE sets up for a potential reversal near the major moving averages.”

KRE could not confirm a 2-day reversal pattern on Tuesday. Even though it closed above Monday’s high, it closed just shy of being within 25% of the day’s intraday highs. Volume, however, was strong.

KRE also ran right into some resistance at the 100 and 200 DMA although posted an unconfirmed phase change back to warning from distribution.

I lead with this tonight because with the S&P 500 now virtually FLAT on the year, seems a whole lot of blood, sweat and tears fell in 2015 to get us to this point-flat.

Keep in mind, we are close to ending the year of the peaceful grazing sheep. Chinese New Year buys us a bit more time than the Roman Calendar’s January 1^st start date. Chinese New Year begins after the first week of February.

So, am I surprised in a trading range year that we find ourselves flat? Not really. However, I am giving you an early head’s up that next year will bring us The Year of the Monkey. Expect a change.

Whether that change comes from the end of zero interest rates, geo-political uncertainty, presidential campaigning, or some nastiness from Mother Nature is too soon to say.

As we end 2015, my biggest focus is on the megatrends that will emerge as our best longer term positions, with the caveat that as the monkey swings from tree to tree, anything that does not fit into an obvious megatrend warrants a much shorter time frame trade.

Quick list of Megatrends to watch in 2016:

1. Climate Change: Solar Energy, Raw Materials at risk, Electric Cars, China as a possible leader in Alternative Energy Technology.
2. Geopolitical Turmoil: Emerging Markets, Raw Materials at risk (including oil), Defense companies and Cyber Security (At Risk-Big Banks), Impact on Travel-Hotels, Airlines and Cruise Lines
3. Domestic Violence: Gun Stocks, Companies that make Security Systems
4. Social Media: Facebook, Twitter, Linked In
5. Online Shopping Versus Brick and Mortar: Began in 2015 and should continue that trend
6. Growing Baby Boomers: Necessary consumables versus luxury goods
7. Video Gaming: Already growing, especially with the Millennials, expect that to continue to burgeon
8. Smart TVs Versus Cable Providers: Continued switch to subscription based entertainment such as Amazon and Netflix versus DirecTV Dish Cable, etc.
9. 3D Printing: Still in infancy but with an inevitable growth trajectory
10. Alternative Currency: Bitcoins and/or some other internet based barter systems.

This list is by no means meant to be a complete one. Furthermore, the list will encompass many different broader based ETFs as well as specific equities for both longs and shorts to examine as we begin next year.

With only 10 days to Christmas, I am at least making my list, and then checking it twice.

S&P 500 (SPY) 203.25 pivotal. Big Resistance 206-206.30

Russell 2000 (IWM) This did get a confirmed 2-day reversal pattern. Uphill battle though with resistance all the way to 116. 112 pivotal and good risk point post-FED

Dow (DIA) Prefer to see another test and hold of 174 rather than buy high into resistance

Nasdaq (QQQ) Unconfirmed phase change back to bullish making the easiest comment-need a second close over 111.85

XLF (Financials) Didn’t get a reversal or phase change. But does get an A+ for effort.

KRE (Regional Banks) 42.00 major pivotal area. If good, resistance at 43.60

SMH (Semiconductors) Unconfirmed phase change back to bullish so now must hold 54.14 and clear 56.00

IYT (Transportation) Other than a double bottom potential, no reversal pattern and relatively weak performance compared to the other indices

IBB (Biotechnology) 324 now major support to hold. Over 332 could see 337 next.

XRT (Retail) 43.00 support with the double bottom at 42.00 if indeed it is one. Over 44.05 area better-Granny still overall weak

IYR (Real Estate) A decent looking chart if holds around 72 down below and clears 74.85 the 200 DMA

ITB (US Home Construction) Held 26.50 now want to see it move back over 27.70

GLD (Gold Trust) Still working off the reversal candle from early December not that it gives me much security

USO (US Oil Fund) 11.77 big resistance.

OIH (Oil Services) This looks better than USO with a potential triple bottom but has to clear 30.50 longer term

XLE (Energy) A good reversal pattern if holds with possible triple bottom especially if clears 67.15

TAN (Guggenheim Solar Energy) Unconfirmed phase change to recovery.

TLT (iShares 20+ Year Treasuries) Acting like the Fed will hike. We have been here before however

UUP (Dollar Bull) 25.25 support 25.60 resistance

EEM (Emerging Markets) Like this if holds 32.45

FXI (China Large Cap Fund) Left a gap which if good should not get filled so 35.50 max support to hold