October 14, 2014
Mish's Daily
By Mish Schneider
In the play, “The Seven Year Itch,” a nerdy, faithful, middle-aged man with an overactive imagination experiencing a mid-life crisis, meets a sexy woman while his wife and child are away. Overcome by fantasies, he imagines himself irresistible to this woman. She in turn, tells him that he is like, “The Creature from the Black Lagoon.” He eventually comes to his senses, fearing his wife’s retribution.
In 2007 the market peaked at then new highs, tumbling dramatically down thereafter, 7500 points in the Dow, until bottoming out in 2009. Then, the market clawed its way back. After the US downgrade in 2011, the market had one quick drop in a moment of reality only to go back into a state of fantasy, where it remained until September 2014-or what we can now call the 7 year itch.
I could go on and on making analogies, but for brevity sake, suffice to say that in spite of the great attempts to rally intraday, the selling comes in with a vengeance. If this is the market’s mid-life crisis and it’s finally getting a grip on the reality of slow global growth, geopolitical discord and a huge disconnect between the earners and the rest of the US, we could still have what appears to now be delusions of grandeur (times when we do rally or when the sexy woman shows up).
A 50% move (or mid-life) from here brings the Dow down to around 12,000. Overall, except for pockets and/or individual instruments that will always find their own way, the cycles of phases in deterioration should continue to play themselves out.
S&P 500 (SPY) Green close good volume. Now, we need follow through-a move over 189.37 a start with 190.62 the fantasy land of the 200 DMA
Russell 2000 (IWM) Good news is that we are hovering around the monthly moving average, one we have not closed below since 2011. The bad news is we are hovering around the monthly moving average, one we have not closed below since 2011.
Dow (DIA) Green close, really good volume so that’s not bad. But, has to get over 163.13 and stay there with its 200 DMA 165.67
Nasdaq (QQQ) Marginal green close good volume. Holding the 200 DMA and way below the August low now super important pivotal level 93.89
XLF (Financials) Inside day on the 200 DMA-has to move up and out over 22.60 or trouble for everyone
SMH (Semiconductors) 46.69 the 200 DMA and if good, has to clear or Tuesdays action was nothing more than a sell opportunity
IYT (Transportation) Unconfirmed phase change back over the 200 DMA-like to see that stick
IBB (Biotechnology) I like that is oversold near the 200 DMA which means it has a chance to recapture a move to 267
XRT (Retail) Until this proves something, I find a weak retail sector troublesome
IYR (Real Estate) Tested then retreated from the 50 DMA
GLD 117.80 support with a doji day
USO (US Oil Fund) When you have 2 doji days, typically it means a bigger move is coming-this one reconciled to the downside
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs –any surprise?
UUP (Dollar Bull) Watch 22.90-if that clears back in business
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