December 4, 2017
By Mish Schneider
Today, the Dow Jones Industrial Average hit a high of 24,534.04.
Not quite at my terror point, but close.
The last time I used the analogy from the Twilight Zone episode when William Shatner sees a gremlin on the wing of the airplane he’s flying in, was when the Dow tried for 18,000.
In 2015, from April through June, the Dow tried to clear 18,000.
Each time it did so on a weekly basis, it failed to close those months out above 18k.
As a result, by August, everyone on the plane saw gremlins which forced a crash landing in the Dow down to 15,370.
Then, it took nearly one year more for the Dow to try 18,000 again.
On July 2016, with no more gremlins in sight, the Dow began the huge leg up to today’s peak high.
Why would I think today could have been the peak high?
First off, over the weekend I covered IBB, the Biotechnology ETF.
Today would have been an excellent opportunity to prove that the lagging sector gained new fans.
As a very wise pilot once said, “I’d rather be on the ground wishing I were in the air, then in the air wishing I were on the ground.”
Speculators, at least in IBB, decided not to fly.
Are your seatbelts fastened?
IBB never cleared 107.50, the 50-DMA and instead, lost ground closing near the critical support at the 200-DMA.
Sister Semiconductors (SMH), the leader of the market all year, saw a gremlin today. Now in an unconfirmed warning phase, SMH is one sell-off away from breaking year-long support at 96.50.
Regional Banks (KRE), had yet another potential reversal pattern after it made new all-time high. Double the average volume on a sell day demonstrates how nervous newer longs are.
Our granddaddy or Russell 2000 (IWM), which also made a new all-time high, sold off on good volume.
SMH KRE and IWM will need second day confirmations for the warning phase and reversal patterns. Waiting a second day ensures you do not sell prematurely, as this market has a couple of bright spots that still matter.
For example, Transportation (IYT), did not reverse after making new all-time highs. Therefore, I would watch this (as I always suggest you do), very carefully.
A close under today’s low tomorrow, especially with volume, will not help the weakness in the other sectors.
Furthermore, Granny Retail (XRT) also closed strong and above the 200-week moving average. That makes 44.05 the new point to hold.
I see the gremlin’s shadow. Should that shadow become a 3-D image, remember that the market has run like a year-long episode of the Twilight Zone.
S&P 500 (SPY) High volume reversal pattern possible if confirms tomorrow. 261.75 the 10-DMA next support
Russell 2000 (IWM) A reversal pattern with 151.80 the 10 DMA to hold or will see 150 fast.
Dow (DIA) Large volume reversal pattern if confirms with a close under today’s low 243.07
Nasdaq (QQQ) 150.50 the 50 DMA and then 149.49-which like the exponential MA in SMH means a lot!
KRE (Regional Banks) Yet another potential reversal pattern if closes under 60.24. Then looking at 57.80 support
SMH (Semiconductors) Unconfirmed warning phase with the 96.50 level so key
IYT (Transportation) Watch this-if it fails 185 caution
IBB (Biotechnology) 103.10 the 50 DMA then its 101-99 as key weekly support to hold
XRT (Retail) 44.05 the support to hold
GLD (Gold Trust) 120.40 the 200 DMA support holding. Back over 121.80 will look better
SLV (Silver) If clears/closes over 15.63 would buy
GDX (Gold Miners) 22.00 support to hold
USO (US Oil Fund) Sloppy-but still bullish
XOP (Oil & Gas Exploration) Looks promising if holds 35.00
TAN (Solar Energy) 23.36 the 50-DMA broke for an unconfirmed warning phase
TLT (iShares 20+ Year Treasuries) Back over the 50-DMA for an confirmed bullish phase
VXX (Volatility Index) We bought a starter position to test the waters
UUP (Dollar Bull) 24.40 resistance 23.98 support
FXI (China) 45.10 support should hold if good