July 20, 2017
By Mish Schneider
The nature of the market reminds me of this pear tree.
Each day for some time now, one to a few pears or sectors/indexes have stood out riper than the others.
Beneath the pears ready for picking, is the low hanging fruit.
On the ground are pears that fell prematurely. Or perhaps they fell because they rotted.
Applying that theory to today, the ripest pear was Big Brother Biotechnology.
IBB, my go to ETF, closed on new yearly highs.
Certain instruments in the Russell 2000 turned out as the low hanging fruit.
Gainers include many you saw in the photo of Granddad IWM presented last night.
World Wrestling Entertainment (WWE), Crocs (CROX), La-zy-boy (LZB) and FTD Companies (FTD), clustered like peach pie in the IWM basket.
That leaves our pear tree garden with the ones lying on the ground.
Can we salvage any or do we simply pronounce them rotten to the core?
Transportation, which just 3 weeks ago became the topic of fascination as a leader, now fell off the tree.
If we go back to July 5th, Transports Require Precise Steering, I featured a monthly chart of IYT.
At the time, the Transportation ETF IYT pierced above the channel line as if it were ready to burst in your mouth like peach ice cream.
However, in the last two days, IYT sold off enough to put the price back beneath the channel line.
Since it’s a monthly chart, the verdict on whether the sector is rotten or salvageable comes at the end of July.
Same with Regional Banks (KRE). Although not as powerful an inflection point, should KRE fail 54.00 that would look rotten.
Granny Retail (XRT) proves that a fruit can fall from the tree, but unless the worms devour it, someone might still consider eating it.
Meanwhile, gardeners keep gathering ground-hugging stocks and ETFs in the oil and gas sectors.
Yesterday, the US Oil Fund (USO), Energy ETF (XLE) and Oil Services ETF (OIH) cleared into unconfirmed recovery phases.
Nevertheless, if planning to include those pears in a recipe, better have antacids on hand. Today, oil sold off and closed back in an unconfirmed bearish phase.
Finally, not too many instruments look as rotten as Chipotle. Stay away from their pear tarts altogether!
The lesson from nature? Pick, gently squeeze and inspect anything you wish to buy before you bite.
***Friday at 5 PM EST on Mish’s Market Minute Daily Facebook page, I will introduce the next cartoon character-Granny Retail. Hope to see you there.
S&P 500 (SPY) 245 now pivotal. Maybe not a strong runaway gap, but small gap up held
Russell 2000 (IWM) So it didn’t gap over 143.25 but it did make new all-time highs.
Dow (DIA) 215 pivotal support.
Nasdaq (QQQ) Going to call 144 pivotal
KRE (Regional Banks) Must hold 54.10 clear 56.50 once and for all
SMH (Semiconductors) 86.68 pivotal area.
IYT (Transportation) Don’t like this action. Often early on predicting trend reversals, we will watch this to see how July ends
IBB (Biotechnology) New 2017 highs-can see 330 next
XRT (Retail) Could not quite clear the 50 DMA by the close.
IYR (Real Estate) After three waves lower, should this clear back over 81.50 BUY! 79.00 support
XLU (Utilities) Money coming back here as this goes unconfirmed bullish
GLD (Gold Trust) 117.30 pivotal. Through 119 impressive
SLV (Silver) 15.20 very tight nearby risk for this to move higher
GDX (Gold Miners) Has to clear 22.75
USO (US Oil Fund) Unconfirmed bearish phase-
XLE (Sel Energy Spdr Fd) Why we look at a 2-day confirmation-First time above the 50 DMA since early 2017 for one day only
TAN (Solar Energy) Still looks Parabolic
TLT (iShares 20+ Year Treasuries) Should this break 125, I’d think correction up over
VXX (Volatility Index) No drama no fear
UUP (Dollar Bull) Draghi pushed this lower
FXI (China) Digestion