June 21, 2017
Mish's Daily
By Mish Schneider
There’s style and design and then there’s short-term versus long-term vision.
The 1950 Studebaker Champion Starlight Coupe exemplified that dilemma.
This Studebaker looked comparatively futuristic at the time. A car long on style and design, the company itself became short-sighted.
Plagued by high labor costs, issues with quality control and a shrinking balance sheet, by 1954, Studebaker was losing money.
Ultimately, Studebaker’s “Fight for Survival” was lost in 1966.
Here, in 2017, the stock market also exemplifies that dilemma.
One obvious dilemma is brick and mortar retail that cannot compete with Amazon and online retailers. Progress comes with costs
Another dilemma is declining prices in fossil fuel that many countries and states count on for revenue.
Meanwhile, alternative energy prices rise. Thus far, most of the impacted places do not have solid plans to switch over.
What about today’s market action? Which movers appear short-term versus those that line up with a long-term vision?
The most obvious place to look is Biotechnology.
After a spectacular 2-day move higher with huge volume, are we looking at a short-term reaction or a longer term vision?
I’m going for short-term reaction. Why?
First off, the biotech industry has been kicked around on both sides of the political football.
In August 2015, after remarks about price gouging, IBB fell from 400 down to 284.
Throught 2016, IBB continued to get tossed about. Dropping down to 250, IBB finally popped, but could not clear 300.
Now, back in the political limelight, the Trump administration proposed an order that does little to specifically call out the drug industry on price gouging. Instead, the draft focuses on rolling back regulations.
Short-term, great for IBB. A vision for the future? Doubtful.
The next place to examine is technology. NASDAQ performed well today. Amazon, Netflix, Facebook and Google led the rally.
For that industry, both the short-term and long-term vision look solid.
However, how far does the performance of a few have to stretch to sustain the rest of the market that seems comparatively weak?
And if stretched too far, is tech vulnerable regardless?
Think Studebaker Champion Starlight.
Without the most salient sectors of the U.S. economy along for the ride in that futuristic coupe, both IBB and QQQs are left with longer-term issues.
Back in the 1950’s, Ford and General Motors captured the American car market share because of mass production and discounted prices.
Now, without improving American businesses, the milestones tech and big pharma achieve could wind up pricing too high for the masses.
Click here to listen to my Benzinga pre-market interview earlier today: https://soundcloud.com/bztv/premarket-prep-for-june-24-the-modern-family-of-the-market
S&P 500 (SPY) Through 245 the rally continues. Under 243 suspicious. Under 240 even more so
Russell 2000 (IWM) Might have failed the channel for real. 140 pivotal. 137.50 support
Dow (DIA) Maybe a low volume reversal
Nasdaq (QQQ) 141 resistance. 138.75 support. Under 137.70 trouble
KRE (Regional Banks) Unconfirmed warning phase
SMH (Semiconductors) 82.35 the 50 DMA. Has to clear 86.10.
IYT (Transportation) 170 resistance. 168 pivotal then under 165 trouble
IBB (Biotechnology) 320 good target 304 good trailing stop
XRT (Retail) 38.10 is hold or die
IYR (Real Estate) 81.00 pivotal
XLU (Utilities) 53.25 area near-term support.
GLD (Gold Trust) Still like if holds 118 and clears 120
GDX (Gold Miners) I still want to keep a close watch here-if clears 22.25 a trigger
USO (US Oil Fund) Really looking extinct
TAN (Solar Energy) Good move and now want to see it hold 18.60 clear 19.00
TLT (iShares 20+ Year Treasuries) 127.37 was the old gap high and now through it see move upside.
UUP (Dollar Bull) 25.40 resistance and under 25.10 not so good
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