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Mish's Daily: Transportation Sector, First to Fall, First to Rise?

February 4, 2016

By Mish Schneider

Monkey to Man-Elvis Costello

In trying to find more analogies to the current market conditions and the monkey, today let’s study the various ways monkey move.

Monkeys walk, lope, run, climb, pounce, and leap. If monkeys have many ways to ambulate, then the market, in any given day, should also move in many different ways.

Thursday, if we scrutinize the Russell 2000, IWM began with a lope. IWM opened higher with an easy gait. After the first 30 minutes, IWM leapt high into a Bull tree; I’m guessing to look for Bull fruit. Alas IWM found only a quick nibble. Being the trickster Monkey, he summoned his friends to follow him to that Bull tree. Alas, gullible friends, the fruit had already been picked.

IWM spent the middle of the session walking around, with an occasional yet short-lived pounce. IWM ended the day mainly walking, trying to decide which tree, a Bull or Bear, will yield the next big meal.

Although having fun with Monkeys, I have not abandoned the Modern Family. After all, humans and monkeys do have a unique bond!

How is the market’s Monkey-like behavior impacting the Modern Family?

Most interesting of the Family is Transportation (IYT). Not only did Trannies lead the market, it left the Bulls hopeful that as the weakest sector of the family since March 2015, they could be the first one to recover. (For specific numbers see below).

Semiconductors (SMH) are worth mentioning as well. Having proved it can hold around the 48.00 level for now, back through 50.00 we should see a move up to the 50 DMA at least.

Granny Retail (XRT) has issues although did hold Wednesday’s lows and put in an inside day. Typically, when that happens, we interpret that as uncertainty. Following which way the range breaks has a statistically high chance of follow through.

As for Biotechnology (IBB), I see no particular impact. IBB could hold 260 and run above 272 just as easily as it could break 260 and continue south. Regional Banks (KRE) seem equally in limbo.

I still prefer to put my money on the ripple effect of rising gold, treasury bonds and a falling US dollar. Certain commodities continue to base out.

For now, many monkeys are gathering in the Commodities rain forest. Since there are 264 different breeds of monkeys, plenty remain in the equity jungle.

Keep watchful eyes on the Monkeys who are walking. As soon as they quicken their step to a lope, between the Modern Family and Commodities, there should be plenty for both the clever Bulls and Bears to eat.

Special Note: I’m doing a webinar teaching you how to deal with this monkey. I’ll also show you how to trade my 10 Mega Trends for 2016! It will be on Friday, February 5th at 12:00 EST. Click here

S&P 500 (SPY) See 190-195 as the range to break one way or another

Russell 2000 (IWM) Closed marginally on the 10 DMA. Like to see this clear 103 for confidence and hold 98.00

Dow (DIA) Over 165 would help

Nasdaq (QQQ) 100 Support and needs to clear 104

XLF (Financials) After Wednesday’s blow off to the downside, bounced today. 20.82 is the 200 week moving average. Must continue to defend that and better if clears 22

KRE (Regional Banks) If this can close out the week over 36.41 that would be hopeful for bulls

SMH (Semiconductors) If can recapture 50.00 better.

IYT (Transportation) If clears 127.71 it must fill the gap to 128.79. If does, would begin to be a buyer of dips. If not, a seller both on strength and first signs of weakness.

IBB (Biotechnology) see above

XRT (Retail) Hovering on the 65 weekly moving average at 40.59. We can call that pivotal and key

IYR (Real Estate) Sloppy but better over 72.10

GLD (Gold Trust) confirmed accumulation phase-why folks are still calling a top here is beyond me. Can it correct some, sure. But see no signs of topping yet

SLV (Silver) Following gold and the weaker dollar

GDX (Gold Miners) Unconfirmed accumulation phase with the great follow through I expected after clearing 15.00

USO (US Oil Fund) Like to see this hold 9.00 now and then clear 10

XOP (Oil and Gas Exploration) 26.60 should hold if going higher

TAN (Guggenheim Solar Energy) Still seems to be stalled here. Needs to clear 25.25 on a closing basis.

TLT (iShares 20+ Year Treasuries) Negated the possible topping candle. Will be interesting to see what effect the jobs number has

UUP (Dollar Bull) Could see pop to 25.30 but if doesn’t do much there, expect to see an eventual move down to around 24.20

FXI (China Large Cap Fund) Needs to really get past 30.00