February 5, 2017
By Mish Schneider
According to the film “Super Size Me,” McNuggets are made from chickens with unusually large breasts.
The ground up meat is combined with stabilizers and preservatives. The chicken mash is then pressed into familiar shapes, breaded, deep-fried, and freeze-dried.
As the week ended, unusually large breasted buyers took the Dow Jones Industrial Average back over 20,000.
The stabilizer? A solid jobs report.
The preservative? A Trump executive order to roll back Dodd-Frank, a law that increased regulations on the US financial systems.
Familiar Shapes? Details of the EO and how far it will go towards deregualtion have not yet been disclosed.
The breaded version? “The banks are going to be able to price products more efficiently and more effectively to consumers," Gary Cohn, Trump adviser and former Goldman Sachs exec.
The freeze-dried version? A potential end to Consumer Financial Protection. Plus, perhaps goodbye to the Volcker Rule, meant to prevent the type of self-interest trading that contributed to the global financial crisis.
As market chickens eat their way to larger breasts, are they oblivious to a McNugget fate?
After last Thursday’s action put the Russell 2000, Transportation, and Regional Banks in unconfirmed warning phases, on Friday all returned to unconfirmed bullish phases.
Granny Retail, in a deterioration phase, got out of bed and toured the hospital’s gift shop. However, XRT showed signs of fatigue late in the session.
Semiconductors and Biotechnology remained firm. Yet, SMH could not make a new all-time high. And IBB has stiff resistance just above last Friday’s price levels.
Interest rate sensitive instruments such as Real Estate (IYR) did a dosey doe with the U.S. Dollar
IYR confirmed the recovery phase, nonplussed by the rising interest rate yields.
The U.S. Dollar closed lower, equally un-phased by the prospects of higher interest rates.
Speaking of rates, last August I featured a monthly chart of the TLTs (20+ Year Treasury Bonds) and the channel that relayed the end of interest rates at zero. https://marketgauge.com/resources/mishs-daily/close-encounters-with-a-channel-of-the-technical-kind/
Here is the same chart, only of Granddad Russell 2000 (IWM).
IWM visited the top of the monthly channel last December.
It currently trades below both the channel line and the Bollinger Band (a bracket used to measure resistance at the upper band and support at the lower band.)
The implication, if turns out the way the TLT channel did, is the move up in IWM, (despite Friday’s gain) could be waning. The TLTs crashed from 142 (July’s peak) to a low of 116.80 by December.
Therefore, my hens and roosters, to avoid winding up in a Styrofoam box, take heed of the first step in making McNuggets.
Should IWM head to the deboning department, start molting like a frightened chicken.
S&P 500 (SPY) 229.71 all-time high. 228 pivotal support.
Russell 2000 (IWM) 138 key resistance, 135.50 pivotal and 133.50 key support
Dow (DIA) 200 now pivotal. 200.97 all-time high
Nasdaq (QQQ) Hovering near highs. Must hold 125
KRE (Regional Banks) unconfirmed bullish phase-55 pivotal support
SMH (Semiconductors) 75.95 all-time high. 74.50 key support
IYT (Transportation) 165 the 50 DMA to hold. 167 resistance.
IBB (Biotechnology) 285 big resistance and 277 big support
XRT (Retail) 42.00 the big support. A close over 43.20 better
IYR (Real Estate) Sideways but better than how the week started
GLD (Gold Trust) 116 pivotal 114.50 support to hold. 117.00 resistance
SLV (Silver) 16.50 now pivotal
GDX (Gold Miners) 25.00 the 200 DMA resistance
USO (US Oil Fund) 11.60 next point to clear
TAN (Solar Energy) Back on radar for signs of volume and strength
TLT (iShares 20+ Year Treasuries) 118.00 support to hold or will head lower
UUP (Dollar Bull) 25.86 resistance and 25.65 support
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