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Mish's Daily: Up 24% in three days. Has it finally bottomed?

August 31, 2015

By Mish Schneider

Where will the market go from here?

Monday was the last trading day for the month of August. The market action on Monday left something to be desired in terms of price movement, with the 4 major indices closing down between -.5% and -1.30% after a choppy narrow range day. Volume was average across the board however, showing that investor interest has not waned.

Everything was not quiet, however. Oil had another noteworthy day closing up 6.52% in USO making this a 24% move in the last 3 days. This move was the reaction to lower production projections from the Middle East as well as a resurgence of violence in the Ukraine.

More interesting that the news driving oil, is the fact that the strong day serves as a confirmation of the weekly bullish engulfing pattern we mentioned last week. This would suggest that USO has finally put in a bottom that will last more than a few months.

With oil on the move and a new month beginning, it’s a good time to visit all our Modern Family members to assess the market’s likely next major direction.

How’s Our Modern Family Doing?

In times like this we look to our modern Family to get an idea of just what is leading and what is lagging in the market.

The Russell 2000 (IWM) preformed the best on Monday, only closing down -.53%. Also the only index to reclaim its 10 DMA. However the volume here was less than average The IWM is still deep in the woods until it can clear its resistance between 116.89 and 118.80.

Regional Banks (KRE) is trying to pull the family up by the hand, closing up 1.03% Monday. With longer-term charts suggesting that this is back in gear over weekly and monthly moving averages. More is needed though if this is to reclaim the 200 DMA at 41.34.

Semiconductors (SMH) was the first of our family to enter a bearish phase in August. Although this closed down -.4% on Monday, we see this coming back nicely from the recent lows. The real test will come at monthly resistance at 49.80

Biotechnology (IBB) is definitely lagging in this market. Closing down -3.60% on Monday and back into a distribution phase after failing to hold the 200 DMA

Transportation (IYT) struggled on Monday closing down -.76% with the rising oil prices on the horizon. However with an inside day here Tuesday’s action will be pivotal.

This just leaves Retail (XRT) and although this closed down on Monday as well, we see promising signs. For instance this has managed to clear back over monthly resistance at 90.41 as well as weekly resistance at 93.52.

However, one not so promising sign is the negative slope of the 50 DMA which seems days away from having a Death Cross (when the 50 DMA trades under the 200 DMA causing a bearish phase.)

We will continue to watch our modern family for insight into the markets next move

S&P 500 (SPY) Found resistance at the 10 DMA at 198.73. Needs to hold support at 196.73.

Russell 2000 (IWM) 114.95 is now support and the next resistance is at 116.89.

Dow (DIA) Again found resistance at the 10 DMA. Tuesday’s R1 at will be key if this is to move up.

Nasdaq (QQQ) Closed just under its 10 DMA at 104.56 but luckily sitting near support at 103.53.

Volatility Index (VIX) An inside day here and the highest close since march.

XLF (Financials) Looking weak after Fridays inside day. Needs to hold 23.09.

KRE (Regional Banks) The next test will come at 41.34 the 200 DMA. But this looks good with support at 40.51.

SMH (Semiconductors) Needs to hold 48.27 and clear 49.80.

IYT (Transportation) Inside day here. However this does not seem to like the climbing oil prices.

IBB (Biotechnology) Unconfirmed distribution phase with the now overhead 200 DMA at 343.80.

IYR (Real Estate) Down almost 2%! With strong resistance at 72.08.

XHB (US HomeBuilders) After trying to clear the 100 DMA at 36.47 for nearly a week this still can’t do it

GLD (Gold Trust) Not a bad end to the month here closing up 3.5% for the month.

SLV (Silver) Really want to see this with a close back over that 14.00 level.

GDX (Gold Miners) Starting to look like a double bottom formation with support at 13.00.

USO (US Oil Fund) What a move! Up 24% at the highs in the last 3 days

OIH (Oil Services) Next resistance is at 31.90.

UNG (US NatGas Fund) 12.50 area proving to be good support!

TAN (Guggenheim Solar Energy) Needed a day of rest! But now needs to clear 30.94 or its back to down-town.

TLT (iShares 20+ Year Treasuries) TBT- 45.83 overhead resistance at the 200 DMA.

UUP (Dollar Bull) Inside day here sandwiched between the 200 DMA at 24.95 and the 50 DMA at 25.23.

RSX (Russia) Thanks oil! Overhead resistance now at the 50 DMA at 17.03.