February 6, 2016
Mish's Daily
By Mish Schneider
“Shock the Monkey”-Peter Gabriel
I really wanted to write a clever monkey analogy commentary given Sunday begins the Chinese New Year and I had such fun with that last week. Note that the Chinese market closes this week in celebration.
However, out of compassion for those who might have been long social media stocks going into Friday’s session, instead I must begin with a comment about LinkedIn (LNKD).
Friday the stock saw a historic 43+% drop in one day along with a mind boggling 44 million shares traded when the average daily volume is just over 2 million shares per day.
The most ironic part of that decline for us personally, is that after years of using the free app for posting my daily, we just recently paid LinkedIn for a “Help Wanted” ad. (The job has been filled.)
Nevertheless, it does bring up a great point about how social media apps monetize or not. It also brings up the question on whether or not the social media mega trend, although culturally here to stay, has real staying power for an investment opportunity.
In 2000, the tech bubble wiped out a lot of cash. I hate to see that happen to folks deeply invested in the social media trend. Facebook (FB), along with Alphabet Inc (GOOGL) both reported fabulous earnings last week, but fell precipitously along with LNKD on Friday.
The moral of the story is that a bubble is a bubble. Any space or sector that gets so crowded and hyped up has always given me pause.
My bigger question (and one I asked all last week) is how to profit from understanding asset allocation and observing the sector/group rotation that is currently taking place while so many other equities melt down?
What I love about trading, is how one can always find opportunity if one knows where to look.
Last week I wrote, “With the decline in the market indices and many sectors and groups, 20+ Year Long Bonds (TLTs) enjoyed a substantial move higher, even after the FED raised the interest rate.
Gold, at the same time, bottomed and then rallied nearly $90 off the lows. Typically, a rise in GLD and a fall in equites sends the US dollar lower and the Euro higher.
From there, other commodities begin to benefit such as certain agriculturals, oil and softs such as coffee.”
Going into this week, same sentiment applies. GLD continues to rock and roll. The dollar bounced a bit on Friday, but not enough to clear the 200 DMA.
Several agriculturals and soft commodities are basing out. Best we can say about Oil is that selling appears to be drying up, although it has yet to see any real buying.
One or two sectors completely destroyed coming into 2016, are now showing signs of life (3D Printing, Transportation). The rest of the market resembles China’s endangered Golden Monkeys. Sought after by poachers for their striking golden fur, their numbers have declined by roughly 50%.
S&P 500 (SPY) Big volume (nothing like LNKD) yet held the low put in on 2/03 at 187.10. Let me remind you that the 6-month Jan Cal Range Low is 185.51
Russell 2000 (IWM) 97.51 the 6-month JCRL. Over 101 would be welcomed
Dow (DIA) Held up the best as IBM closed green. Not that I take much stake in that, but it’s good to look for leadership somewhere
Nasdaq (QQQ) Broke the 6-month calendar range low and has fallen from grace as the leader to the loser. 99.51 pivotal
Volatility Index (VIX) Looks higher if holds 25.25
XLF (Financials) 20.82 is the 200 week moving average. Must continue to defend that or a test of August low at 18.52 could be coming
KRE (Regional Banks) Unless clears and holds 35.81 quickly, Southside
SMH (Semiconductors) 46.14 the 6-month JCRL
IYT (Transportation) It could be a bear flag. But, it could also be a reversal still in the works. How will we know for sure? It fills the gap to 128.79 before it sees 117.70
IBB (Biotechnology) 250 could hold and if not, see 240 next
XRT (Retail) Still above the 6-month JCRL for now.
GLD (Gold Trust) Actually want to see some correction so I can buy more!!!
SLV (Silver) Following gold
GDX (Gold Miners) Confirmed accumulation phase with the great follow through and trading higher than it’s been since last July
USO (US Oil Fund) Seems it held up well all things considered.
TAN (Guggenheim Solar Energy) I have my buy order ready under current levels. If you wish to know where that is, please sign up for my Advantage Service
TLT (iShares 20+ Year Treasuries) Such an interesting time. These low rates offer borrowers a reason to take cash out but not to put in the market!
UUP (Dollar Bull) Tried to pop to 25.30 but petered out. Expect to see an eventual move down to around 24.20
EEM (Emerging Markets) Still think there could be opportunity here
EWP (Spain) This looks good too
FXI (China Large Cap Fund) China Market closed this week in honor of Chinese New Year
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