October 20, 2013
Mish's Daily
By Mish Schneider
We’re not advocating keeping your head in the sand-historically, the last two weeks in October have been bearish. But, if the small caps and/or Russell 2000s and NASDAQ hold Friday’s lows, we have a breakaway gap in the works. Remember last week I wrote that the next fear mongering most likely to come out will concern the Federal Reserve tapering on Quantitative Easing? I don’t think a crystal ball was necessary on that one. Indeed, talk did begin to circulate, which is why in the last hour of Friday’s trading session, the rates firmed off their lows, leaving a possible reversal candle in the ultrashort ETF TBTs. I point this out because as we head into Monday, I will be watching for two different and opposite confirmations-either the breakaway gaps hold and all’s good in the hood; or, the rates climb and TBTs take out Friday’s highs and keep going. Then, we watch interest rate sensitive groups such as Real Estate, Homebuilders, and Gold, to name a few begin to falter from their recovery and accumulation phases back to more negative ones. That would suggest to me, a possible dominoes effect, at least temporarily. However, let’s end on a bright note-lots of new highs were made in many other groups-Semiconductors, Oil and Gas Services, Exploration, Financials, Transportation, Energy and Retail.
S&P 500 (SPY) We have had 3 accumulation days of volume on this up move over the last couple of weeks. We did make new highs on Friday. All of this makes Friday low important.
Russell 2000 (IWM) New highs and still no blow out type volume so should be good unless some dramatic action happens like a big gap lower. Throw that salt over your shoulder!
Dow (DIA) Laggard-and for good reasons-IBM! The last big rally that peaked in September, this was the first one to falter. So, keep eyes here
Nasdaq (QQQ) Google-I salute you!
XLF (Financials) 20.93 was the 2013 highs to clear-got to 20.96 before closing at 20.91
SMH (Semiconductors) A breakaway gap in the works here too
XRT (Retail) New 2013 highs
IYT (Transportation) New 2013 highs
IBB (Biotechnology) Closed down 1%. Seems tired overall.
IYR (Real Estate) Touched the 200 DMA and retreated. Existing home sales reporting Monday. Big eyes here as well
XHB (Homebuilders) Really needs to hold Friday’s low.
XOP (Oil and Gas Exploration) XOP is the new IBB!
EWG (Germany) New highs
FXI (China) Like 38.00 as support to hold
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