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Mish's Daily: What to Look for When Buying Weakness

February 8, 2016

By Mish Schneider

A Hearse: Not the Transportation You Want

Paul Ng, a Geomancer and Philosopher, published predictions for 2016 based on the Year of the Fire Monkey.

Mr. Ng has a Master’s in Business Administration along with an expertise in Feng Shui. His holistic approach to using Chinese Astrology/Philosophy to look at emerging cycles in the market has intrigued me for years.

Considering the gazillions of predictions made by both fundamental and technical market analysts, why not have a geomancer-one who interprets the elements of the earth combined with a philosopher-one who studies the fundamental nature of knowledge and reality-join the fun?

My takeaway from Mr. Ng’s work is that this year the world continues to be very volatile and unpredictable, both politically and economically. The recent gold rally comes as no surprise then, considering the yellow metal is historically the “go to” staple of the volatile and unpredictable.

“Thunder” (metaphorically) may cause the world economy to fall first before rising again later in the year. Hopeful fire monkey that Mr. Ng.

As I have already written about the rising Treasury Bonds, declining dollar, firming commodities (metals, maybe oil, definitely water) and possibly ags, plus the bottoming pattern forming in Emerging Countries, what else is there to look for?

Last week I wrote about Transportation (IYT). I like to look at instruments that might be completing the 6 phases.

IYT has 3 advantages to its name.

  1. It is a member of the Modern Family.
  2. It has been in a bearish phase since last May.
  3. It outperformed the indices Monday and never came close to testing recent lows or the 6-month January Calendar Range low.

Concerning Modern Family members, IYT has the sole distinction of embodying those 3 attributes.

It’s with that mindset I watch for others with similar qualities. It could be specific equities, commodities, country ETFs and/or currencies.

Ultimately, the best scenario is for the indices to stabilize. However, rather than hoping for that to happen, instead use the fact that they haven’t yet to keep you from trading impulsively.

With IYT here’s what swing traders might consider waiting for. It fills the gap to 128.79 and then buy the next dip against the 125 area.

Till then, here’s another tidbit from Mr. Ng. In 2016, illnesses from the food chain will be all the rage, with new viruses forming. He says that businesses to do with burials are favorable. I looked into publicly traded companies that are in the burial business. Couldn’t find any. I welcome any ideas!

S&P 500 (SPY) Getting close to the 200 week moving average at 179. Suspect that’s where it will wind up eventually.

Russell 2000 (IWM) Reason why I think SPY will get there-this is already under it. At this point, waiting for something that suggest stability and aside

Dow (DIA) If looking here for leadership, it did hold the 6-month calendar range low at 158.23

Nasdaq (QQQ) Oversold for maybe a short term pop-but that is a far cry from saying bottom

XLF (Financials) Don’t see any reasons to be cheerful

KRE (Regional Banks) Next big place of support, 31.50

SMH (Semiconductors) 46.14 the 6-month JCRL

IYT (Transportation) 128 is also the 200 week moving average. Therefore, no longs unless it closes over that on a weekly close

IBB (Biotechnology) Sitting right above the 200 week moving average at 239.40

XRT (Retail) Above the 6-month JCRL for now.

GLD (Gold Trust) Might finally get some correction as this is a bit overbought

SLV (Silver) wouldn’t be surprised to see this stall for now

GDX (Gold Miners) Possible topping candle but need more evidence of that

USO (US Oil Fund) 8.64 is a great pivotal point.

OIH (Oil Services) Holding

XLE (Energy) Holding

UNG (US NatGas Fund) Holding and just under the 50 DMA

TLT (iShares 20+ Year Treasuries) Not overbought up here-amazing

UUP (Dollar Bull) Tried again to pop to 25.30 but petered out. Expect to see an eventual move down to around 24.20

EEM (Emerging Markets) Still think there could be opportunity here