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Mish's Daily: Will a Bear Take Down A Key Index and Five Sectors?

October 13, 2015

By Mish Schneider

I say high, you say low
You say why and I say I don't know, oh no
” -The Beatles

Last 3 trading days the market has been in an even tighter trading range than the one we have been writing about or the August 24th to September 17th range.

Last night, I turned to Fibonacci levels on the S&P 500 (SPY) chart, mainly because (after a trip to the Four Corners) I found the differences between 13th century US Southwest and Europe so fascinating.

Primitive Cliff Dwellers and Fibonacci, lived at the same time. Architects constructed Notre Dame in Paris, while the Anasazi built kivas to keep warm.

My fun with researching a time period dichotomy also led me to find something I later learned was rare-when Fibonacci levels line up almost perfectly with major moving averages.

Such is the case with SPY. Fibonacci price levels indicate that the 50 DMA (199.09) is almost precisely 50% of the August 24th-September 17th range from highs to lows.

The September 17th high (202.89), is close to a 61.80% Fibonacci retracement.

Can my Modern Family (IWM, XRT, IBB, SMH, KRE and IYT), a family that transcends the ages, help us predict next moves?

Granddad Russell 2000 (IWM) returned to an unconfirmed bear phase. A declining slope on that 50 DMA suggests that not only was the recent rally weak, but that the overall downtrend is likely to continue.

The key is if support at 111.50 then 109.40 and the 2015 low 106.99 will hold. Guess is “yes” as the trading range should keep for the time being.

Granny Retail XRT never took out the 50 DMA. Suggests lower prices and similarly to IWM, with levels of support along the way down.

Biotechnology (IBB) never came close to the 50 DMA-bearish and underperforming, another reason to think lower. Semiconductors (SMH) have fared better, currently in a recovery phase. Yet, if it breaks down under 50.00, not good.

Prodigal Son Regional Banks (KRE) although in a bullish phase, will be hard pressed to hold up the rest with a move under 41.50. That leaves Transportation (IYT).

Although trannies have kept the party going since its gap higher on October 5th, the longer term monthly chart has “bear flag” written all over it unless it closes out October over 147.50.

Meanwhile, my Modern Family and I invite you to please come listen Wednesday at 9 AM ET to my interview on Benzinga Premarket Prep Show. I will discuss this further as well as the basing action developing in commodities. Click here to join.

S&P 500 (SPY) Under 199 can see 192 Subscribers: Negative Pivots in all

Russell 2000 (IWM) Needs a second day under the 50 DMA to confirm the bear phase

Dow (DIA) 167.50 good support with 169.44 a pivotal number ahead of that

Nasdaq (QQQ) Didn’t make it through the 200 DMA so question now is will it hold 106 then 104?

Volatility Index (VIX) No surprise that after 9 days down, we would see this reverse back over the 100 DMA

XLF (Financials) Since it never cleared the 50 DMA, a weak link with lots of bank earnings coming up

KRE (Regional Banks) support at 41.49. Still has overhead resistance at 42.77 the 100 DMA.

SMH (Semiconductors) resistance at the 100 DMA at 52.75.

IBB (Biotechnology) Does not look good

XRT (Retail) Unless clears the 50 DMA at 46.46, under 44 trouble

IYR (Real Estate) 73.00 support needs to hold

ITB (US Home Construction) Held support at the 100 DMA at 27.56 so far

GLD (Gold Trust) 112.12 the August high to clear.

SLV (Silver) Inside day under the 200 DMA-watch this

GDX (Gold Miners) Inside day

USO (US Oil Fund) Not particularly friendly to this now unless it holds 14.60 and turns back up quickly

XLE (Energy) Looks better than USO. 66.15 support now to hold with 70 key to take out

TAN (Guggenheim Solar Energy) Still digesting the rapid move from the lows. 30.21 support at the 50 DMA.

TLT (iShares 20+ Year Treasuries) Confirmed recovery phase.

UUP (Dollar Bull) 25.00 resistance. 24.60 support

CORN (Corn) 23.00 support and back over the 50 DMA

BAL (Cotton) Big day here

DBA (PwrShs DB Ag Fd) 21.52 the 2008 low it matched today. Like this on dips now

DBC (DB Commodity Index)

SGG (Sugar) correcting