June 7, 2020
By Mish Schneider
I love this photo.
If you see it right side up, it looks like a piece of deadwood coming out of the tree trunk.
Upside down, it looks like the head of a bird.
Ok, maybe a somewhat prehistoric bird, but a bird nonetheless.
The point is it reminds me of the market this past week.
If the market were truly reflecting the times-civil unrest, potential for a second wave of the pandemic, an unemployment rate of more like 16% (considering the millions who were counted as employed receiving PPP money)-then it would look like a piece of dead wood.
Instead, the market is like what I did to this photo, moved it upside down to show you the illusion of a perfectly wood-sculpted bird. I even put my initials upside down to reinforce that point.
This got me thinking, with NASDAQ making new all-time highs along with Semiconductors, is this really an illusion or a photographer’s trick?
Last week I featured the volatility index (VXX).
Friday it closed lower, but not that far from its 200-DMA.
Bonds (TLTs), which had a huge sell off, reversed, and closed on the intraday highs.
And Gold miners (GDX) tested its 50-DMA and closed well above it.
Bonds and miners in particular, have my attention for this week.
Hence, what does a market top look like?
Going back to VXX, TLTs and GDX-they are all counter movers that had huge corrections and potentially reversed on Friday.
One other instrument to note is Transportation IYT. Like KRE, that has often proved as a reliable early warning indicator.
On Friday, IYT cleared and then reversed to close below the 200-DMA.
Monday I will be watching carefully to determine if the market maintains its bird-like illusion or turns right-side up and becomes dead wood.
Keith took a turn at stockchartsTV and did a 30-minute presentation. Here is the link.
Russell 2000 (IWM) Needs to hold 147.30 to maintain this rally
Dow (DIA) 263 big support resistance at 280.
Nasdaq (QQQ) Uncharted territory-just like this whole year
KRE (Regional Banks) 48 resistance and needs to hold 43.00
SMH (Semiconductors) If there is a reversal, this can drop to 140 and still look good. 160 resistance
IYT (Transportation) 177 resistance. If fails Friday’s low, 162.50 next big support
IBB (Biotechnology) 130-136 current range
XRT (Retail) Another possible exhaustion gap reversal. 43.50 pivotal
Volatility Index (VXX) Cash closed right on the 200-DMA
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