December 19, 2016
By Mish Schneider
Fluorescent towers of light rise into the mist. Is the green tower taller or is that an illusion created by where I stood?
As the week before Christmas begins, so do the indices rise into the mist. The Dow gained marginally. The trading range was within last Friday’s trading range.
Same with the Russell 2000 and the S&P 500. Both traded within last Friday’s range for yet another round of indecisiveness near the record highs.
Only NASDAQ 100 traded above last Friday’s highs. However, QQQ’s closing levels were well within Friday’s range.
Indecisiveness around 20,000 in the Dow with scant volume and participation interprets similarly to the photo.
Given the inside trading day in 3 of the 4 indices, we round the corner to seek a different perspective. When looking up into the mist, always better to discern illusion from reality as plainly as one can.
Are these higher prices for real or are they merely an illusion from where traders currently stand?
From the west side of 9th Avenue, the market looks higher. As we swing around to the northern view on 44th Street, the perception changes.
Now, when we look up we see that interest rates softened. Should that trend continue, those tectonic forces from December 4ths Daily, indicate the potential bear trap for those who expect the Fed to carry out the 3 more rate hikes they consider in 2017.
With the 20+ Year Treasury Bonds gaining in price today, so did the metals. Not enough action nor volume to make any bold predictions, the horrifying event in Berlin is a sobering reminder how easily the current trend of higher equities and lower commodities can change.
Walking around to the east side of 8th Avenue, the perception changes yet again. The Retail Sector (XRT) although closed green, looks heavy.
Biotechnology (IBB) affirmed the lack of speculative interest. Backing further away from resistance levels on the daily chart, IBB displays the red tower as looming over the green one.
Semiconductors (SMH) held Friday’s lows but could not clear important resistance levels. Regional Banks (KRE) refused to budge from 9th Avenue. The Prodigal Son continues to have faith that the green tower grows taller.
Only one more view from the south side of 43rd Street to consider. Transportation (IYT) traded within Friday’s trading range. With Trans as indecisive as his Pa the Russell 2000’s, both will need to head over to 9th Avenue to join Regional Banks.
If Trans, the Russell’s and Regional Banks decide to walk over to 8th and join Retail and Biotechnology, the mist could very well turn into heavy fog.
S&P 500 (SPY) Inside day. Under 224.50 trouble and over 227 better
Russell 2000 (IWM) Inside day. 134-134.50 pivotal support to watch. Back over 138 better
Dow (DIA) 200 to clear 196 to hold.
Nasdaq (QQQ) 119.65 pivotal area
KRE (Regional Banks) If this cannot get back over 56.00, then expect lower levels with 54 then 52 support.
SMH (Semiconductors) 71.50 support to hold if this is good. Over 72.50 better
IYT (Transportation) A huge correction would bring this down to 154. If recaptures/closes 168 never mind.
IBB (Biotechnology) Unless this clears 275, could see move to 240
XRT (Retail) A break of 45.50 would be where the real fun begins.
IYR (Real Estate) Rounding bottoming action if holds 75.80
GLD (Gold Trust) Could be bottoming but also could be a new bear flag forming
GDX (Gold Miners) Needs more work
USO (US Oil Fund) 11.40 now support if this is to continue upwards
TAN (Solar Energy) Dancing around but not reading anything into it yet
TLT (iShares 20+ Year Treasuries) 116.35 very big support on a monthly chart. Now, 118.50 resistance
UUP (Dollar Bull) Runaway gap if holds over 26.50