August 7, 2017
By Mish Schneider
Please allow me to be the gazillionth person to tell you that the Dow made another new all-time high, now 9 days in a row.
Please allow me also to repeat to you that this market continues to wear many Faces.
We left off with the weekend Daily focusing on the Bearish, Warning, Two-Faced and Hopeful Faces. (After all, the Bullish ones require no further comment.)
Two Modern Family members important to the overall economic picture mix, are in Warning Faces: The Russell 2000, Transportation.
Although both put in modest rallies today, neither improved phases.
Of the three Bearish Faces, (Silver, Grains, the U.S. Dollar), Silver and the Dollar remained Bearish.
The Grains were mixed. Soybeans and Wheat improved to Recovery Phases or Hopeful Faces.
The Two-Faced Faces: Semiconductors, NASDAQ, 20+ Year Long Bonds traded more on the Bullish side.
And our Hopeful Faces: Energy, Oil, Retail (Brick and Mortar) basically remain thus-hopeful.
I imagine our spiritual friend in the photograph having a conversation with the woman in white that is like the one that our August doldrums in the market are having.
“I get it. I’m dull but peaceful. Boring but steady. Will you stay or will you go?”
The white-clothed man leaves the door to the front gate of his adobe home open.
Similarly, the market leaves the door to its front gate open for new investors banking more on the steadiness than the excitement.
The man cajoles the woman by promising her that looks can be deceiving.
The market’s quiet tone is characteristic of the summer. Yet August can also yield surprises. Big ones!
I well remember August 2011. The Dow Jones (DIA) had a 13.8% decline that year.
Moving ahead to August 2015. The DIA had a 15.2% decline.
Incidentally, in both 2011 and 2015, the sharp drop began near those time period’s all-time highs.
More modestly, in August 2016, the DIA declined by around 6%.
The performance of the Russell 2000 during those exact timeframes was even more dramatic.
The August 2017 market, trading at historically low volatility (or with practically no fear), leaves room for surprises.
Please allow me to voice concerns over the market’s divergences, particularly the relationship between 2000 stocks in the Russell’s that is in warning and the 30 stocks in the Dow that is bullish.
What is that man saying to that woman? “Thank you for coming. Come back soon!”
Or, “Don’t leave. I may have on this white tunic and these red Tibetan slippers, but I also got a hot rod that’s ready to percolate.”
I see the market saying the same to us. “Thank you for buying; come back soon.”
Or, “Don’t leave. You see this low volatility index and these quietly bullish Dow signals, but through this gate I have a 10% move waiting to rock your world.”
S&P 500 (SPY) Teeny range today. 248-245.68 range to break one way or another
Russell 2000 (IWM) 140 majorly pivotal.
Dow (DIA) Amazingly, yet another new all-time high
Nasdaq (QQQ) 144 pivotal
KRE (Regional Banks) 54.25 pivotal support
SMH (Semiconductors) 88.00 point to clear
IYT (Transportation) Cleared 166.50 so now pivotal and if holds, some relief possible til it gets to 169.75
IBB (Biotechnology) 308.50 major support with 322 the place to clear
XRT (Retail) 41.00 pivotal
IYR (Real Estate) Like to see this hold 80.00
XLU (Utilities) 54.00 good place for this to clear and 53.00 to hold
GLD (Gold Trust) 119 50 DMA support
SLV (Silver) 15.25 support. Over 16 looks good
GDX (Gold Miners) Like to see 22.00 hold
USO (US Oil Fund) 10.00 pivotal. 10.60 big resistance to clear
TAN (Solar Energy) 21.85 now nearest support after a big day!
TLT (iShares 20+ Year Treasuries) Cleared 124.86 the 50 DMA now pivotal
UUP (Dollar Bull) Returned over the 200-week moving average at 24.20. Now pivotal number