February 18, 2017
By Mish Schneider
Last week, the fire roosters and hens got it on. After the rooster’s clumsy but successful leap onto the hen’s back, all four indices climaxed at new all-time highs.
So, if first comes love, then comes marriage, is this egg the baby in the baby carriage?
Perhaps suffering from some post-partum stress, our hen who laid this egg, now sits atop it hoping it hatches into a fine, healthy chick.
Hopeful, there are nonetheless reasons she must sit diligently so that nothing happens to prevent the birth of her hatchling.
Although more intimated than defined, the Fed could raise rates in March. Obviously, higher interest rates equal higher borrowing costs.
A rising dollar will make American exports more expensive. With manufacturing jobs decreasing in the US by about 53,000 since a year ago, we need foreign buyers to prevent more workers from losing their jobs.
Although we have yet to see an infrastructure spending plan, should the government start writing checks, inflation can rise faster.
Since last week, we established that left-sided brain traders tend to be more logical, strategic and rational and that currently those attributes embody a fair share of fear. All of the above concerns make logical sense.
However, we also mused that the right-sided or intuitive traders may have the advantage as they currently possess a more hopeful attitude.
Back to our sitting hen. Both intuition and logic will keep her protecting her unborn chick.
Therefore, as we head into this short week, is there a higher probablity for a successful birth?
The Dow has continually climbed since the election. Optimism that Trump’s stimulus plans will make the economy grow faster prevails. So does the hope that his trade agenda won’t cause a trade war.
A higher stock market reflects economic optimism and might encourage Americans with investments in the market to stimulate growth by spending spend more money.
Only 48% of Americans are invested in the stock market. Although warnings of elevated stock market valuations persist, the public is known to abandon discipline and ignore valuations.
Fear of missing out can cause panic buying. That could lead to a blow off top. Something we have yet to see.
A quick look at the Modern Family.
The Russell 2000 consolidates near the all-time high. Semiconductors continues a leadership role.
Transportation and Regional Banks backed off from the highs, but on scant volume and without any technical violations.
Biotechnology, close to some significant resistance, hung in there regardless with a strong close to the week.
Retail has a big week coming up. Lots of earnings reports will provide more conclusive evidence of just how much consumers are out there spending.
A broody hen is a fierce protector of her eggs. She will growl, peck and even flap her wings should any threat come near. Her eggs must be kept in the position she has set them in. Otherwise, she may kick some eggs out.
Therefore, provided no new threats emerge this week that willl stress out our mother hen, the chick will incubate and hatch. Then, we should see our proud fire rooster passing out cigars.
S&P 500 (SPY) Good consolidation near the highs to end the week. 240 still in focus with 231 ultimate support
Russell 2000 (IWM) Inside digestion day
Dow (DIA) 204 big support
Nasdaq (QQQ) Closed on new all-time highs. 128 key support
KRE (Regional Banks) Digestion near new highs
SMH (Semiconductors) Back to her wonder woman status with new highs
IYT (Transportation) Cleared back over 171.15 the pivotal number
IBB (Biotechnology) 285-287 pivotal support. Inside day. Strong end of week performer
XRT (Retail) Got back through the 200 DMA ahead of a big retail earnings week
IYR (Real Estate) 79.00 the 200 DMA
GLD (Gold Trust) 116.25 max risk. 117.50 minor support
SLV (Silver) 16.90-17.00 key support
GDX (Gold Miners) Failed the 200 DMA so back to an unconfirmed recovery phase
USO (US Oil Fund) Sideways action until cash takes out 54.00-then watch it fly
UNG (US NatGas Fund) Subscribers:
TAN (Solar Energy) Now should hold 18.00
TLT (iShares 20+ Year Treasuries) 118 lower support with 120 pivotal
UUP (Dollar Bull) 25.80 support 26.20 resistance