April 20, 2016
Mish's Daily
By Mish Schneider
Day 3 of the Dow over 18k. All is right with the world.
The Russell 2000 tidily held recent gains. Our Prodigal Son Regional Banks (KRE) cleared the 23-month moving average. With 7 trading days left to the month let’s see if it can close above there. In the meantime, KRE pushed valiantly towards the 200 daily moving average.
As for the rest of Modern Family, most are getting as fat as the fatted cow Granddad slaughtered when the prodigal KRE returned home.
Sister Semiconductors eats sparingly. But she does indeed eat holding key support. Transportation (IYT) made a new 2016 high. Trannies are fat and happy for the time being.
Granny Retail (XRT) is a few clicks away from clearing the weekly moving average. Since Granny doesn’t eat much meat, she’s hanging in there. Gramps is a bit worried about her maintaining rather than gaining wait. All the Family needs though, is for her to maintain at this point.
Let’s see-who did I leave out?
The antagonist of our Prodigal Son Parable-Big Bro and Elder Brother to KRE-Biotechnology!
What’s up with IBB? Is it life imitating art? Is the lack of speculators in a sector that reigns as one of the most speculated? Is big pharma finished? Could it merely be the end of a cycle that began before most others even started back in July 2009?
Biotechnology (IBB) Big Bro or Elder Son
Above you see the weekly chart. Although it held the 200 week moving average, compared to the Family and many other sectors of the market, it has yet to test the December lows.
While everyone else has enjoyed a move above the 200 DMA, IBB can at least boast a move over the February and March highs. That makes 272 a super important support level.
Other than stewing in his younger brother KREs renewed love, there are fundamental reasons Biotech languishes.
First, Valeant Pharmaceuticals’ stock plunge. With allegations of shady accounting and rising costs of research and development, Valeants’ future smacks of Enron’s fate back in 2001. Not exactly a warm, fuzzy for speculators.
Secondly, increasing regulations have crimped the old paradigm of expansion and profitability. Merger and Acquisitions, which topped headlines in 2014-2015, have been replaced with cost cutting and job elimination.
Is it time for the Family to disown Biotech?
More importantly is the question: where should speculators go next? Before the love affair with Biotech from 2009-2015, from 1997-2001 Internet stocks were all the rage-until the dot.com bubble. In 2004-2008 Real Estate ruled, then drooled.
Now what? Treasuries? That boat sailed. Solar Energy, 3-D Printing-maybe. Commodities-already started but folks are nervous buying futures. Perhaps the ETFs will help ameliorate that fear. Banks? Prodigal may be prodigal, but I doubt banks are our future. Pot? Even on 4/20, there not much to buy.
It seems logical to conclude that we must wait to see where volume picks up. Where speculators run into as the next big thing. Sure, price pays. But price accompanied by volume is the playground of the adventurers.
S&P 500 (SPY) 206.84 point to hold. December high 211. Double top? Maybe
Russell 2000 (IWM) Now 2 doji days in a row. Not surprised to see indecision since no one can figure out why the market is on new 2016 highs
Dow (DIA) Traded at 182.68 back in March when the Dow hit 18k.
Nasdaq (QQQ) Has a gap at 111.84 to fill. 110 huge area to hold on a closing basis.
Volatility Index (VIX) Inside day-last 2 days big volume-a move/close over 10.83 tomorrow could shake bullish resolve
XLF (Financials) 23.25 the 200 DMA and now a confirmed accumulation phase
KRE (Regional Banks) 40.64 is the 200 DMA for this to close over again in order to confirm the accumulation phase
SMH (Semiconductors) 54.00 a good point to hold.
IYT (Transportation) 144 now closest support and over 146 should continue
IBB (Biotechnology) Inside day
XRT (Retail) 45.00 pivotal. 45.70 the weekly MA to clear
IYR (Real Estate) And just like that this could be done with a reversal pattern after new highs
ITB (US Home Construction) Consolidating after moving out of the consolidation-inside day
GLD (Gold Trust) Confirmed bullish phase. Still looking for a close over 120 to stick
SLV (Silver) 15.50 now point to hold
GDX (Gold Miners) 25-26 should be next target if holds 21.00
USO (US Oil Fund) 10.80 next point to clear
XOP (Oil and Gas Exploration) Confirmed Accumulation Phase
TAN (Guggenheim Solar Energy) If what I see as a volume in TAN today is correct-WOWZA!
TLT (iShares 20+ Year Treasuries) And there goes the 50 DMA-unconfirmed warning phase
UUP (Dollar Bull) 24.50 pivotal
Every day you'll be prepared to trade with:
