February 14, 2018
By Mish Schneider
“Cause…baby we were born to run!” Bruce Springsteen.
A classic song title that masks a bit of deception.
“Born to Run” sounds liberating. Market bulls sing the same song.
Yet the lyrics go on to say, “In the day we sweat it out on the streets of a runaway American dream.”
Runaway American dream. Now, there’s something we all think about a lot these days.
Today, all eyes were on the inflation or CPI report. The interpretation of 2.1% inflation is enough to make the Federal Reserve happier about reducing the balance sheet.
The dollar sank, and gold rallied.
Everything is doing exactly what we positioned for.
NASDAQ, after writing this last night- “NASDAQ 100 came closest (to the 50 DMA). Percentagewise, QQQs had the biggest gains on the back of Amazon,” went into an unconfirmed bullish phase.
So did Semiconductors, which lagged yesterday.
As did Biotechnology, where speculators already had shown up and proceeded to get all lovey dovey with the market.
Therefore, should we forget that our new American dream includes no concern for a rising debt? Or by the increased spending on everything except a safety net for those who need it?
Are profits for corporations and the 1% that own 84% of the stocks enough to keep the market from “sweating it out on the streets?”
My intention is to avoid political commentary. Rather, these are facts put forth by the curent administration.
As a logical trader, facts are factored in. However, logic eludes many investors. FOMO or fear of missing out reigns supreme.
The main question I want you to consider is that since 3 of the 6 Modern Family members are still in warning phases, along with the S&P 500, does this market have enough steam to continue going vertical?
Walk with me out on the wire.
You didn’t buy the dip. You didn’t get long yesterday. You finally bought today. Yes, you are out on the wire.
The risk to last week’s low versus the incredible resistance SPY, Transportation (IYT-let’s not forget about Tran), the Russell 2000 and Retail (XRT) have is palpable.
SPY cleared 267.09 (the weekly MA it failed after 15 months). Yet it has not cleared its overhead 50 DMA at 271.50.
When or if it does, the relative strength will return to nosebleed territory. The public, frightened by the recent crash, will buy again. Most likely at the highs.
I say a better plan is really the same plan. Watch the U.S. Dollar as sensitive to inflation. Watch the rates-the Fed should be more emboldened.
Watch inflationary instruments such as gold. Watch agriculturals, still incredibly cheap.
And finally, rather than get in now that the risk is beyond logical and the reward appears irrationally exuberant, wait for the market to turn back down. And short or hope there’s a buyable dip.
“Baby this town rips the bones from your back
It's a death trap, it's a suicide rap
We gotta get out while we're young…cause…”
S&P 500 (SPY) 267.20 is the weekly chart breakdown it held for 15 months and now pivotal. 271.62 is the 50 DMA resistance. If this breaks 267, could be the rally over.
Russell 2000 (IWM) 151.50 major overhead resistance (the 100 DMA) could not clear. Under 148 gets wonky again
Dow (DIA) 251.28 the 50 DMA overhead resistance. And, under 245.50 weaker
Nasdaq (QQQ) 160.77 the 50 DMA that this now has to hold
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