The Winter of the Market’s Discontent

December 5, 2017

Mish's Daily

By Mish Schneider


Shakespeare, in Richard III, uses the phrase “Winter of our Discontent” as a way for King Richard to express his feelings about living in a world that hates him.

Interestingly, while Richard expresses his own discontent, he is also celebrating the fortunes his family has gained.

The U.S.’s political scenario certainly mimics the time of Richard III in several uncanny ways.

The Year of the Fire Rooster is not quite over (February 16th is the start of the new Chinese Year).

However, winter’s water has begun to supplant summer’s fire.

Our Rooster will be replaced by the Earth Dog in 2018.

I will have commentary on the essence of what that could mean for the market in future Daily’s.

Thus far, the fire rooster has thwarted a lot of discontent in 2017, as seen through the relentless rally of the stock market.

As we literally enter the start of winter, we begin to see the underpinnings of the winter of the market’s discontent.

Do these recent reversal topping patterns have our fire rooster heading for the coop?

I have yet to find an indicator as reliable as the 1 index and 5 sectors of the Economic Modern Family.

Just as Sister Semiconductors (SMH) relayed major bullish readings at the start of the year, SMH now broadcasts warnings.

Transportation (IYT) which exploded once it cleared the 50 Daily Moving Average and into a Bullish Phase, now signals a possible top in place as of Monday’s action.

The Russell 2000 (IWM) which had small-cap value investors frothing at the bit, made new highs yesterday and today, confirmed a reversal top.

Regional Banks (KRE), the aptly named Prodigal Son, behaved true to his nickname.

Up at new all-time highs yesterday with tons of options buyers, today, KRE asks for forgiveness after his costly extravagance to the bulls.

Big Brother Biotechnology (IBB) is close to breaking down under the 200-DMA. That makes the 99-101 area key to hold.

Finally, Granny Retail (XRT) exemplifies how eager value players are to find value in what remains a brick and mortar apocalypse.

Although XRT marginally held the 44.05, key area, should it break 44.00, expect more selling from weak longs.

Richard III says that if he “Cannot prove a lover” he is “Determined to be a villain.”

If the market cannot find the muster to head back to recent highs and the love place, then perhaps it will turn equally malevolent.

Note: Will be traveling tomorrow so no Daily Commentary.

S&P 500 (SPY) Confirmed reversal unless it holds 262.27 and roars back over 265.

Russell 2000 (IWM) 149.23 the 50-DMA. In markets that have topped out, it would be typical to see this go into a warning phase before the other 3 indices. Back through 152 would be better

Dow (DIA) 239 the 10-DMA with this confirmed reversal pattern. Through 244 better

Nasdaq (QQQ) 150.70 the 50 DMA and then 149.50-which like the exponential MA in SMH means a lot!

KRE (Regional Banks) Another confirmed reversal topping pattern. 58 support next to hold

SMH (Semiconductors) Confirmed warning phase with the 96.50 level so key

IYT (Transportation) Wrote Monday night, “Watch this-if it fails 185 caution.” 179 next support level

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) I like where it held today if you look at the weekly chart. Back through 120.45 could be a low risk buy opp

SLV (Silver) Watching carefully to see if this was it for the downside

USO (US Oil Fund) still bullish

XOP (Oil & Gas Exploration) Looks promising if holds 35.00

TAN (Solar Energy) Back to an unconfirmed bullish phase. 23.43 pivotal

TLT (iShares 20+ Year Treasuries) 127.70 key resistance

VXX (Volatility Index) Still in our starter position

UUP (Dollar Bull) 24.40 resistance 23.98 support

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