January 3, 2017
By Mish Schneider
Jackson Pollock-abstract expressionist painter
At the Museum of Modern Art in New York, curators viewed One: Number 31,1950 the way that Pollock painted it-laid horizontally. This provided a rare and fresh perspective. As such, the scale became more readily understood.
In the spirit of changing perspective, we officially began stock trading 2017.
Pollock would fling his arms in sweeping gestures. He controlled where the paint would be thick and where it would form fine, thin lines.
This year, unlike any before it, our new President, abstract expressionist if you will, tweets. One broad stroke of Trump’s paint can send General Motors sinking and Ford Motors sailing.
With Presidential tweets to consider, the noise will be palpable. It is our job to view the market like we view an abstract painting. Find a thread and keep the noise at bay.
How can we make the market’s potentially abstract scale more readily understood?
If curators find laying a Pollock horizontally a key to comprehension, we traders must think similarly.
As we know, the market fares better with stability. Determining how unified or disparate the Modern Family sectors are will help.
Beginning with the Russell 2000, we see a trading range. Last week (and so far this week’s) low is an excellent vantage point to see whether the small caps interpret the new administration as one that will make broad or thin strokes in changing policy.
From there, Transportation must hold its current bullish phase. Today, it closed down 1/4%.
On day one, Regional Banks, a pillar to evaluate how confident the market is about an improving economy, traded with some uncertainty.
Semiconductors also traded with uncertainty although, with more of a touch of thinness.
Retail began the year trading inside two key moving averages-the 50 and 200 simple daily ones. That implies even more uncertainty. Biotechnology rallied, yet remains in a bearish phase.
The concrete conclusion for the macro picture -short-term intact, longer term, too soon to call.
Beyond the thick paint, we have the individual equites and commodities. Yields softened helping some, hurting others. Most of our attention this year will most likely stay on individual performances.
Out of the gate, several of our 2017 watch list roared. That means, we can immediately narrow down our focus and trade per our tried and true trading strategies-ultimately, investing in those with the best risk/reward parameters.
I cannot stress enough how important it is to tune out the noise. Pollock had control over his abstraction. Discipline and a trading plan will help you stay in control and find comprehension in the market’s abstraction.
S&P 500 (SPY) An interesting doji day to start the year. 223 support and over 227 better
Russell 2000 (IWM) 134.50 pivotal point held to the tick. Over 138 better
Dow (DIA) 200 to clear 198 pivotal and 197.50 support
Nasdaq (QQQ) 118 support with a move back over 120.00 better
KRE (Regional Banks) Began on new highs and closed basically unchanged.
SMH (Semiconductors) 70.25 support at the 50-DMA and 72.75 level pivotal
IYT (Transportation) If cannot hold 163 could see 154. Over 166 better
IBB (Biotechnology) Unless this clears 275, could see move to 240
XRT (Retail) 44.75 pivotal resistance and 43.98 pivotal support
IYR (Real Estate) A weekly close over 78 will look better.
GLD (Gold Trust) Before we call bottom, check out the possible bear flag forming on the weekly chart. A weekly close under 109.35 would not be good.
SLV (Silver) Better than gold. Like to see this fill a gap to 15.87 for promise
GDX (Gold Miners) Inside day under the 50 DMA. Over 21.80 tempting
USO (US Oil Fund) 12.00 is big resistance and 10.80 big support
TAN (Solar Energy) Looks like a 2-day reversal bottom in the works if confirms
TLT (iShares 20+ Year Treasuries) 118.50 pivotal 118 support and resistance at 120
UUP (Dollar Bull) No more runaway gap but it has momentum on its side
FXI (China) 35.47 the 200 DMA overhead