October 7, 2017
By Mish Schneider
in January 2017, I wrote about the Chinese New Year’s Astrological sign of the Fire Rooster.
At the time I reported that, “Yin fire is still positive for the economy and the optimism continues to bring confidence to buy, particularly in spring and summer time when the candle flame gains seasonal support and drives up the illusory optimism.”
Moreover, I went on to write, “as the yin fire is an illusory candle flame, it will be extinguished by autumn and winter.
The astrological prediction goes on to say that, “Serious setbacks towards October will bring a long-term bearish market as there is no more fire years before the Tiger year 2022.”
Mother Nature has certainly shown us more than a fair share of rain with the recent hurricanes and another one on the way.
Even New Mexico has had an unprecedented amount of rainfall lately.
I read today, Tokyo is preparing for floods beyond anything they’ve ever seen.
In California, as of September 2017, more than 4900 fires have scorched nearly 229,000 acres.
Those fires have finally subsided.
Nevertheless, the October full harvest moon peers through cloud cover.
Is it time to consider that the Yin fire has extinguished, hence ushering in a sustained period of rain?
Never fret, as one market’s rain could very well be another market’s fire.
Currently, the ratio between the performance of commodities versus stocks has only been this low twice in the last 100 years. First in 1928-29 and then in 1967-69.
Last week, I mainly focused on the Federal Reserve and Monetary Policy.
I did so because of their vocal intention to raise rates more and reduce the balance sheet.
They spoke more enthusiastically that the strong labor market will lead to higher wages which in turn will lead to rising inflation.
For an experienced commodities trader, the opportunity that could present itself is exhilarating.
Evidence appeared last Friday that perhaps the greatest hedge for the last part of this decade emerges.
The 20+ Year Treasury Bonds are a hair away from breaking major weekly chart support. The Fed might actually keep their promise.
The Dollar had a good week, but closed Friday red and below the high of the week at 24.47.
Metals, agricultural commodities and coffee strengthened. Wood continues to make new all-time highs.
DBA, the ETF for agricultural commodities, closed in a confirmed recovery phase.
In equites, the indices barely budged from recent highs. At this point, no obvious topping pattern exists except for the perma-bear’s will to make one up.
Savvy commodities traders often traded spreads. They might put on one side of the spread first or what is called, “lifting a leg.”
Then, they will take the other side of the spread at hopefully, a more advantageous price.
If considering this type of trade, commodities already show potential.
Next, look for a classic topping pattern to possibly short the indices.
However, until the proverbial index sky opens up and pours down upon investors, at least have an umbrella handy.
S&P 500 (SPY) Inside day near the highs. Ripe for anything
Russell 2000 (IWM) 150 now pivotal support. Under 149.40 could see profit taking
Dow (DIA) Inside day. Also an anything can happen scenario
Nasdaq (QQQ) Another new all-time high which is interesting as FANG always seems to be the last to know if this week begins shakily
KRE (Regional Banks) 56.00 must hold and 57.26 next place to clear
SMH (Semiconductors) Certainly looks great with a close on new all-time highs.
IYT (Transportation) It confirmed the topping pattern with better than average volume-one to watch for rain
IBB (Biotechnology) 340-343 resistance with now 337 pivotal support.
XRT (Retail) Could not close the week over 41.75 the 200-DMA (unconfirmed recovery day). 42.23 big weekly resistance to clear
IYR (Real Estate) Confirmed bullish phase. I would not want to be long under 78.00
GLD (Gold Trust) 119.50 support held and thru 121.27 could provide a decent risk
SLV (Silver) Big volume spike and possible reversal
GDX (Gold Miners) Unconfirmed bullish phase
XME (S&P Metals and Mining) 31.60 key support
USO (US Oil Fund) 9.80 support. I still like this longer term
XLE (Sel Energy Spdr Fd) Couldn’t hold the accumulation phase
OIH (Oil Service Holders) 25.40 held on the close making this pivotal for the week
TAN (Solar Energy) 21.00 major support to hold. Resistance at 22.00.
TLT (iShares 20+ Year Treasuries) 123.87 pivotal 122.60 support then 119.00
UUP (Dollar Bull) 24.30-40 big area to hold/clear and 24.00 pivotal support
FXI (China) 45.00 support point to hold