March 6, 2016
Mish's Daily
By Mish Schneider
The Price is Right!
Since I have spent so much time acquainting you with my Modern Family while stressing the importance of PRICE above all else, why not have a little fun and invite our Family as contestants on The “Price is Right”, a gameshow that began in 1956. It has the distinction as the longest running game show on TV-both in the US and Internationally.
For those not familiar with the rules of the game, random contestants from the audience are called up to the stage. Each contestant is shown a prize. The contestant that bids closest to the prize’s actual retail price without going over wins. They then play several other pricing games later on. Those pricing games involve cash and/or additional, higher-value prizes.
Our First Contestant-Brother Transportation (IYT)!
As early as February 4th when I titled my Daily, “Transportation Sector, First to Fall, First to Rise” the producers of the “Price is Right”, knew that IYT could be a big winner.
The heaviest weighted stock in the ETF basket IYT is FedEx Corp. Second is United Parcel Service and then Kansas City Southern. When IYT took the stage, although FedEx hadn’t reported yet, Trannies guessed right and advanced in price.
One month later, IYT continues to be right on the money and our top prize winner. With spot on guesses in how Kansas City Southern and UPS might report, Trannies remain a winner. However, when will his luck run out?
Let’s call our second Contestant-Grandma Retail (XRT)!
Granny is given a few retail chains to look at. Her job is not just to guess the price, but if she’s right, rally as an ETF that represents a basket of stores. Conversely, if she overvalues a chain(s), the ETF must drop in kind.
Recently, Abercrombie and Fitch (up over 10%), Kate Spade (surging 11%), Michael Kors (up 20%) and Best Buy (up a meager 4%), to name a few reported earnings.
Granny Retail was already getting hot on the trail after she made a double bottom on February 11th. Now, as of last week, most of the retail chains have reported.
XRT could be stalling ahead of the 200 Daily Moving Average. Like IYT, we know every winning streak must end. Question, of course, is when.
For brevity’s sake and assuming you get the point of our game, I will comment on the other Family members below. However, the takeaway lesson for this week is:
Like in the game, the more an instrument or ETF gains in price (or wins), the higher the stakes become going forward. Such is the case for this rally in IYT, XRT and so many others.
As bear market rallies tend to end as rapidly as they begin, typically (again using the metaphor for the game) it happens when anyone in the audience thinks the game (or buying a rally) looks too easy.
S&P 500 (SPY) Low volume rally continued with 200-202 point of resistance and fairly significant too. 195 key support
Russell 2000 (IWM) Granddad’s been a contestant as well. He was on a roll last week. This week, we look at 103.50 major support to hold with overbought conditions and big resistance at 109.60
Dow (DIA) 170-172 big resistance
Nasdaq (QQQ) With FANG all red, seems it might not reach 108 the big resistance. 103.50-104 key support
Volatility Index (VIX) Hello 200 DMA. Market closed green and so did this. Over 22.10 could get interesting
XLF (Financials) I’m going to go out on a limb here and say that this will see 21.75 before it sees 22.49
KRE (Regional Banks) Yet another contestant, he could still remain in the game. However, that means holding 37.00and clearing 38.79
SMH (Semiconductors) As our only female offspring, SMH quietly became the first one to close over the 200 DMA at 52.50 and go into an unconfirmed Accumulation Phase. Needs a second close
IYT (Transportation) 136.15 first point to hold. If fails it, look for 133.75 next.
IBB (Biotechnology) Big Bro is the loser of the Price is Right. But then again, he could be the winner if what he’s trying to tell us is the game is over. 270 must clear and 250 must hold
XRT (Retail) She’s been on fire and actually overtook the lead from IYT. However, under 44.40 expect to see the support at 43.20 quickly.
IYR (Real Estate) 73.25 is the 200 DMA to hold
GLD (Gold Trust) Got to the top of a channel and closed red with decent volume. Not sure I would read much into that though, unless it breaks under 118 hard
SLV (Silver) Think it’s time for this to play some catch up. Looking at buying dips now with risk to the 200 DMA
GDX (Gold Miners) Maybe another reversal from the highs.
USO (US Oil Fund) Closed well over 9.35, the best close in a month. Now, that should be support if this is to continue to 9.90 and above
XLE (Energy) I hope you took some profits at 61 form the 58.50 buy recommendation. Now, could have more so no loss stop on balance
UNG (US NatGas Fund) Someone came in and cleaned up some of the D(UNG).
TAN (Guggenheim Solar Energy) Momentum flipped to positive. Waiting for a good setup now to buy
TLT (iShares 20+ Year Treasuries) 127.50 support and 130 pivotal
UUP (Dollar Bull) Closed t 25.25 making that pivotal for this week
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