What We Will Use to Ascertain Market’s Next Moves

October 9, 2023

Mish's Daily

By Mish Schneider

For consistency, here are the key go to’s during an uncertain time in the market:

  1. The next direction of long bonds (TLT)
  2. The next direction of the small caps and retail sectors (IWM XRT)
  3. The next direction of commodities, all of them, but particularly the agricultural ones, oil and precious metals (DBA DBC).

There are other relationships to watch like our risk gauges (all still risk on).

And of course, there are stocks that will outperform like what we saw on Monday in defense companies (PLTR).

Overall, though, and to simplify the macro, these top 3 points should help a lot.

The first chart is the monthly charts of small caps and retail (IWM and XRT).

The 80-month moving average (green line) is a longer-term business cycle or about 6-7 years.

Besides the blip during covid, IWM has not BROKE that 80-month MA since 2010. XRT sits right above the 80-month.

To remain bullish, those lines must continue to hold.

We have seen lots of mean reversions and reversal looking bottoms in TLT.

They have been fake outs.

What we do not want to see is TLT outperform SPY (Leadership indicator remains risk on as long as SPY outperforms).

Furthermore, we can see TLT rally along with SPY if SPY continues to outperform.

The best signal for watching a TLT rally is the 10-DMA or cyan line.

TLT has not been above that since September 1st.

A strong rally in TLT where SPY begins to underperform could signal risk off. Moreover, it could negatively impact equities as fears of recession or hyperinflation kick in.

In the commodities world, DBA and DBC offer a good way to assess the spectrum of raw materials and inflation.

We like this as commodities are a big focus during wars and geopolitical stress.

Also this week, we will see PPI and CPI numbers come out.

While oil, gold, precious metals and miners were up today along with some soft commodities (sugar, coffee), grains were red.

Looking at DBA on the left, it is underperforming SPY and in a caution phase trading under the 50-DMA (blue).

Could DBA rally? Sure. Over 21.80 we would begin to think more bullish in agriculturals.

DBC on the right, more oil and precious metals focused, also underperforms the SPY. That is surprising and supports a risk on environment.

Through 24.75 that picture changes.

Should oil and PMs start to outperform the SPY, then the inflation conversation begins to dominate.

Hence, right now, risk on prevails.

Commodities strengthened after they became oversold. But they remain weaker than the SPY.

And long bonds, are also experiencing buying-but too soon to know if yields have topped. And if they have, is it for the right reasons?


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Mish in the Media - All clips here

Final Bar Sub Host for Dave Keller 10-09-23

Making Money with Charles Payne Fox 10-05-23

Yahoo Finance 01-05-23

Real Vision 10-04-23

Kitco on gold 10-04-23

BNN Bloomberg Opening Bell 10-04-23

Schwab with Nicole Petalides 10-02-23

Business First AM Tesla 09-29-23

BNN Bloomberg Opening Bell 09-27-23

Business First AM on Indices 09-27-23

Benzinga Pre Mkt 09-22-23

Final Bar with Dave Keller  09-21-23

Business First AM 09-19-23

Yahoo Finance Chart Analysis 09-19-23

IBD Investing 09-13-23


Coming Up:

October 12 Dale Pinkert F.A.C.E.

October 26 Schwab at the NYSE

October 26 Yahoo Finance at the NYSE

October 27 Live in Studio with Charles Payne Fox

October 29-31 The Money Show

Weekly: Business First AM, CMC Markets


ETF Summary

S&P 500 (SPY) 435 resistance

Russell 2000 (IWM) 177 resistance

Dow (DIA) 338 resistance

Nasdaq (QQQ) 368 resistance

Regional banks (KRE) 39.80 -42.00 range

Semiconductors (SMH) 150 resistance 143 support

Transportation (IYT) 237 resistance 225 support

Biotechnology (IBB) 120-125 range

Retail (XRT) 57 key support if can climb over 61, get bullish

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