The Market Carnival That (N)Ever Happens

May 13, 2017

Mish's Daily

By Mish Schneider


At the end of the week, the market proved two things.

First, very few people are at the mall.

In the bottom left of the photo, in what almost seems like an afterthought, stands a deserted J.C. Penney. That stock is yet another victim of a brutal death by brick and mortar.

Secondly, upfront and center, is the Carnival. There, families are happily spending their hard-earned money on ephemeral fun.

This metaphor for the country and the stock market’s Modern Family convey a striking reality of present times.

A single word describes the populace, the Modern Family sectors and the overall market performance-DISPARATE.

In the famous paintings by Francisco Jose Goya titled, Disparate de Carnaval 1816-1819, Goya painted the lugubrious fate of the masses.

In 19th Century Spain, a time of distinct contrasts, Goya “saw” the French Revolution coming.

How then, does a Carnival in the parking lot of a deserted mall illustrate the disparity in the 21st Century?

In the U.S., the gap between the richest and poorest is the widest ever recorded. Cyclically, after coming out of a period of complacency, we see more and more anger arising against this kind of inequality.

How “revolution” looks in current times will not resemble the Storming of the Bastille during the French Revolution. Rather, we have seen grassroots organization like the Freedom Caucus grow stronger.

Since the recent election, unrest among the populace continues to escalate.

Although not so obvious with the U.S. stock market trading on new highs, the Modern Family mirrors this disparity and unrest. (And not in a distorted funhouse mirror sort of way.)

In the Modern Family, Semiconductors and the top NSADAQ stocks can be considered the “elite” class. SMH along with Amazon and Netflix closed on record highs.

If the technology sectors represent the wealthiest, the brick and mortar retail sectors represent the poorest. In stark contrast, XRT lost more ground, closing in a Bearish Phase.

We can regard Transportation, Biotechnology and Regional Banks the dwindling middle class. Both IYT and KRE closed the week on their lows. IBB attempted a rally last Friday, but could not breach the 50 DMA, hence remaining in a Warning Phase.

The Modern Family stretches between the best and the worst like an extended rubber band.

Can that rubber band stretch further? Yes. The possibility of a blow-off rally exists.

Can the rubber band snap? Yes. The possibility of a market open with a huge gap down also exists.

Goya observed abuses of power, intellectual conservatism and jingoism of the masses. The Modern Family offers us a similar glimpse.

***Note: I will be taking some personal time off. Geoff Bysshe and Keith Schneider will be writing the daily commentary. I will check twitter periodically for questions.

S&P 500 (SPY) 239-240 resistance could turn into a launchpad if all goes well. 237.70 support then 236.60

Russell 2000 (IWM) 140 pivotal. 141.50 to clear and 136.80 to hold

Dow (DIA) Resistance at 210-212. 207.70 support

Nasdaq (QQQ) 137.50 support through 138.50 better

KRE (Regional Banks) 52.45 support and through 54.50 better

SMH (Semiconductors) Wonder Woman in a theater near you very soon

IYT (Transportation) 161.40 support and through 164.50 much better

IBB (Biotechnology) 287-284 the key support area held. 293.75-294.75 key resistance

XRT (Retail) 42.00 could hold and if it doesn’t look for 40.50-41.00 next

IYR (Real Estate) Another sad representation of the poorest

GLD (Gold Trust) If it can fill the gap to 188 ok, if not, looks heavy

SLV (Silver) 15.89 resistance and if this fails last week’s lows see 15.00 next.

GDX (Gold Miners) Looks better than gold but into some resistance now at 22.67-22.80

XME (S&P Metals and Mining) Meh

USO (US Oil Fund) I want to like it but….it needs to clear 10.00

XLE (Sel Energy Spdr Fd) Back over 68 will look better

XOP (Oil & Gas Exploration) 34.90 key support

TAN (Solar Energy) Some consolidation over 18 good

TLT (iShares 20+ Year Treasuries) Not ready to die yet. And why would it with all the uncertainty

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