Who or What is Pulling the Market’s Strings?

June 9, 2019

Mish's Daily

By Mish Schneider

blankWith a downbeat jobs report, falling yields and U.S. Dollar, gold rallying along with the volatility index, the market ran up another 250-300 points.

The Dow Jones, after last Monday’s low of 24,700, shot up over 1300 points by the end of the week.

Yet, my theme of definitely maybe prevails.

The level of conflicting tweets about China, Mexico, Russia, the Federal Reserve, etc., do indeed leave investors feeling manipulated.

I have seen rumors and unsubstantiated news move the market in the past.

I particularly remember Anwar Sadat getting assassinated about 10 times before the actual event occurred on October 6, 1981.

A step back in history, Sadat, the President of Egypt, was assassinated during the annual victory parade.

With four layers of security and eight bodyguards, the army parade should have been safe. Yet a distraction allowed a troop truck towing artillery to approach Sadat with 3 hand grenades hidden under their hats. One grenade exploded, while additional assassins fired AK-47s, hence killing Sadat and 10 others.

I was trading sugar and gold futures at the time on the New York Commodities Exchanges. News came by the way of Reuter’s on ticker tape. No 24/7 news loops or social media back then.

Both sugar and gold were already in bullish phases.

Back to my point, today we have way more than assassination rumors driving the market.

Literally in one day, Trump retweeted his optimism on trade deals. Meanwhile, Putin attacked Trump for use of tariffs and sanctions, whilst he aligns with China.

Trump also expressed in a tweet that a deal with Mexico has a good chance. In the next sentence, he stated that if there is no deal, hello Monday and 5% tariffs.

The Federal Reserve is expected to cut rates as soon as July. At the same time, Powell touts the U.S. strong economy.

Any wonder we all feel like puppets on a string?

So, I go to the charts. They comfort me, as they always have.


Top left is Retail XRT. Note not only did XRT have an inside week, (traded inside the trading range of the following week), but remains in a distribution phase.

As a huge part of the GDP and with a direct impact from tariffis, it does not look like Granny Retail is buying the rumors for now.

Next up is Regional Banks KRE. Barely holding onto the 200-week moving average, our Prodigal Son is skeptical at best.

Then we have the Russell 2000. IWM followed the other indices higher, but remains the weak link. In a strong caution phase, IWM also had an inside week.

That’s great news for us chartists. It means that the range break will be very telling.

Bottom row we have Transportation IYT. The best news is the confirmed bullish engulfing pattern. You can see that the black bar literally engulfs the red bar from the week before.

We need IYT to stay in the game.

In the middle is our Wonder Woman sister Semiconductors SMH. SMH flew back over the 50-WMA (blue) and back into a bullish phase.

But is SMH enough to fuel the rest of her weaker family?

Finally, we have Biotechnology, IBB. That eked back above the 200-WMA. IBB had an inside week as well.

With three of the family members having inside weeks, we are clear on who and what to follow, depending on how the range breaks.

Obviously, SMH has to hold these gains, and IYT must follow through with more upside after a bullish engulfing pattern.

In the pulling strings department, it’s good to see that stubborn ‘ole Granny Retail ‘aint havin’ it.

We will see if the administration acquiesces to one very important old lady.

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S&P 500 (SPY) Until it closes over 295 look out for weakness. Key support areas are 293.50 and 291.50

S&P 500 (SPY) Unconfirmed bullish phase and a weekly bullish engulfing pattern. That makes 286.71 real important for Monday.

Russell 2000 (IWM) Pretty poor performance in comparison. Inside week, so that is what I will do, follow the range break. And under 148.30, that is a hint.

Dow (DIA) Unconfirmed bullish phase making 260 the ever so important pivotal level.

Nasdaq (QQQ) 183.41 the 50-DMA. And, if this cannot hold 181, look for a move back down to around 176.50.

KRE (Regional Banks) 51.40 support.  Overhead resistance at 53.50

SMH (Semiconductors) Sticking my neck out here, I do not think this rally will hold in tech. But I would not go short unless it breaks under 101.01. Resistance overhead at 105

IYT (Transportation) 182.90 pivotal. 185.75 resistance. 180 support

IBB (Biotechnology) 103.15 pivotal 104.89 the high to clear if good

XRT (Retail) 42.12 the major resistance with now, 40.00 big support

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