Will Grandma Retail Whip This Bull Market Into Shape?

September 12, 2017

Mish's Daily

By Geoff Bysshe


Sometimes the market takes a day to let reality sink in.

For example, yesterday I highlighted the counter intuitive price action of the TLT’s having a big down day while two other interest rate sensitive sector ETFs, XLU and IYR experienced big up days.

Today, TLT fell again, and this time IYR and XLU both had big down days as we’d expect. Had the TLT’s reversed and gone higher today, I suspect the IYR and XLU would not have sold off.

My point is that markets often take a day or two to react to new price levels or shifting dynamics. As a trader, if you’re not looking out for this, you’ll easily feel fooled when good charts turn bad or vice versa.

These two negative sectors were the only sectors down in our sector summary table today so there rally today was nice and broad.

And today’s most interesting action was in what rallied, not what fell.

For the second day in a row the S&P 500 (SPY) has been the index breaking out while the DIA and QQQ and IWM only rallied much less convincingly.

This divergence is a result of the interesting moves in the market today, which came the form of big up moves in XRT (retail), IYT (transportation), and KRE (regional banks).

Within the last two weeks, all of these Modern Family members were in the midst of major technical breakdowns. They were the bull market’s problem!

In this column we’ve walked through the steps that identify when breakdowns evolve into head fakes for traders, and all three of these ETFs have reversed beautifully.

Today they continued to power higher as prior market leaders like SMH and IBB seem stuck.

After their nice multi-day run, they deserve to take a few days to consolidate, but after any consolidation (and certainly if they don’t even pause) if their up trends continue, these are the reasons to expect this market breakout to continue with or without our prior market leading favorites participation.

S&P 500 (SPY) Big breakout continues higher. Look for intra-day support at 248.80, 248.40, and then big level to hold now is 248. Look for support at 247.50. Resistance at 250.

Russell 2000 (IWM) Cleared the key level of 141 and trended higher. Support is now 141, 140 then 138.45 is important support to hold and then 137.25 and 136.25. Resistance at now 142.30.

Dow (DIA) Big day but not at new highs. It did break and hold 221 so that’s now support, then next level at 220. New highs over 221.68

Nasdaq (QQQ) Consolidation day, in part because of AAPL product announcements and choppy action. Look for support around 145.30. Resistance is at the highs at 146.60.

KRE (Regional Banks) Nice follow through day. The 51-52 level should be good support now. 53 is the next big level to break.

SMH (Semiconductors). Missed the new high by a penny. Look for support at 88.70, and resistance at new highs at 89.72.

IYT (Transportation) Nice follow through day. Look for support around 170. Resistance at 172.20-.50 is resistance.

IBB (Biotechnology) Another consolidation day in a sector with nice compression at highs. Support around 330-328.80. Breakout above 336.80.

XRT (Retail) Nice big up day after 2 consolidation days. Should hold 39.75. Resistance around 41.00-.50 so I’d look for consolidation here.

IYR (Real Estate) Sliced through support at 82, but stopped at a reasonable level and at the 10-DMA. 81 is the key level to hold. Resistance at 82, 83, and 83.50.

XLU (Utilities) Big down day sliced through support at 55.40, but held key level of 54.60. Resistance likely at 55.40.

GLD (Gold Trust) Consolidation day on the 10-DMA.  Support at 126 and 125 and resistance at 127.50, then last week’s highs at 128.32.

GDX (Gold Miners) Consolidation day, but still under the 10 DMA. Look for support at 24.10. Expect a resistance at 25.00, 25.70 and then more at 28.25

SLV (Silver) Inside day on the 10-DMA. Look for support at 16.30-.20. Big resistance at 17.40, and 17.50.

USO (US Oil Fund) Consolidation day. It’s still following the pattern of a major bottom. Should hold 9.60, and must hold 9.30. Big resistance at 10.25.

UNG (Natural Gas) Back up to the key 6.75 area. Needs to breakout over this area. Be patient. Here’s what has been written here for weeks… “Still in a bear trend according to phases. If it has a 30-min Opening Range breakout over 6.75 -6.90 it could indicate a longer-term bottom. The all-time low is 5.78, the weekly base high is 9.80. So the risk is just over a $1 and the first target is just over $2, but if it breaks $10 then $12 is the next stop.”

KOL (Coal) Consolidation day above 10-DMA and multi- year highs Look for support at 14.90-.80 and breakout above 15.45

TAN (Solar Energy) Consolidation day under 22.00 resistance and 21.00 support. That’s all you should focus on.

TLT (iShares 20+ Year Treasuries) Another down day confirming its break of the 10-DMA. Look for support 126.40. Resistance at 128.

UUP (Dollar Bull) Consolidation day needs to clear 24. Important support at 23.

FXI (China) Consolidation day after yesterday’s break out over key 44.40 level. If it can hold over 43.40, the long-term picture looks like an accelerating breakout. Support at 43.40 and 42.75. Next resistance is 46 - 46.50

EWW (Mexico) Now 5 days of consolidation and trying to hold swing low from mid-August 50-DMA. 55.40 is support it must hold.

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