The Market Spins a Fragile Web

September 26, 2016

Mish's Daily

By Mish Schneider

mdaily20160927Monday, many Traders felt like this crab shell spider waiting in repose in hopes of catching flies in their webs. Anxious to capture more flies, the threat from predators’ kept spiders and traders hungry.

Over the weekend I focused on a potential relationship among solar stocks, oil and stock prices. The gratification became instant. Oil and a couple of solar stocks rallied.

The stock market however, fell 166.62 points. Ahead of tonight’s historical presidential debate, watching yet another diversion in the market play out kept me from committing to any new longs or shorts.

So while First Solar in particular seems to confirm a bottom, and oil tries hard to follow suit, the overall market continues to flash even a stronger warning.

Another lifeline for the market lies with Nasdaq and the Russell 2000. Here’s why.

Both the QQQs and IWM held onto their bullish phases. Tomorrow is critical for the QQQS. Holding support, a move below 117 could spell trouble as last Thursday and Friday’s price action can now prove to be a reversal pattern.

Similarly in the Russell 2000, major supports sits just below today’s closing price at 122.25. Both NASDAQ and the Russell 2000 could either save the day or create a domino effect in the already weakened S&P 500 and the Dow.

The Modern Family, like spiders, has plenty of predators to fear.  Retail, perhaps the most endangered sector, has been running from lizards for weeks. A break below 43.00 will clearly prevent Granny from catching any flies for a while.

Transportation, attempting to dodge frogs, can help.  In a bullish phase, a boost in Trannies is a boost in the overall economy.

Regional Banks went into an unconfirmed warning phase. That means tomorrow our Prodigal Son may wind up in the mouth of a Praying Mantis.

I learned that Monkeys, usually plant eaters, will consume spiders they find on one another during the grooming process. Monkeys, as this is the Year of the Monkey, may have gotten to our Sister Semiconductors.

Finally, Big Brother Biotechnology got hit by the spiders’ biggest predator. Humans. Humans either wish to kill spiders or trap them as elaborate pets to show off. The intention of today’s selloff remains to be seen.

Tuesday’s post-debate market action should help clarify what spiders should do next. So will any follow through to the upside in oil and solar stocks.

Having certain defense mechanisms, spiders can avoid predators all together. They may blend in, jump away or release venom.  It all depends on the specific species of spider.

S&P 500 (SPY) Confirmed warning phase. Back to looking at 212 support. Better if can clear over 217

Russell 2000 (IWM) I will note this was a low volume selloff. The next move here is important

Dow (DIA) 180 terror or not?

Nasdaq (QQQ) 118.00 pivotal support. 116 underlying support

KRE (Regional Banks) Unconfirmed warning phase with 41.30 the 50 DMA pivotal

SMH (Semiconductors) 66.30 a good level to hold

IYT (Transportation) 144-146 the resistance to clear. 141.00 support

IBB (Biotechnology) 290 support level

IYR (Real Estate) 81.30 support

GLD (Gold Trust) 127.20 the 50 DMA support

SLV (Silver) 18.50 pivotal

GDX (Gold Miners) 26.50 support

USO (US Oil Fund) The best thing? The weekly MA gets closer and closer. Inside day

TAN (Guggenheim Solar Energy) narrow range inside day.

TLT (iShares 20+ Year Treasuries) 138.30 the 50 DMA

UUP (Dollar Bull) Until it closes over 25 or under 24.60 I’m neutral

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