December 23, 2018
By Mish Schneider
After writing hundreds of Daily blogs in 2018, it is with both joy and sadness that I write the last one for the year.
I wish to thank all my devoted readers and those financial publishing services who reprint my Daily on their websites.
Throughout this volatile year, certain trends have emerged, and we expect these trends to continue into the beginning of 2019.
Furthermore, we are focusing on the potential trends that could offer traders profits.
With the market now in a bearish phase, we are looking for more signs of an economic slowdown, with the possible move into raw materials.
We believe that interest rates have bottomed.
Therefore, we expect that Treasury Bonds will not serve as a “safety net,” even though they have done so over the last ten years.
We believe the metals are trying to bottom, but do not merit a big position just yet.
What else do we believe and what signals are we waiting for?
Before we safely say “BUY” commodities, we are watching the U.S. dollar.
Until the U.S. Dollar index breaks (DXY) 95.90 on a weekly close, the current strength is not conducive for raw materials.
Should the dollar break that level, besides gold, watch sugar futures.
Forty years ago, my first trade ever was in the sugar pit in NY. It was the start of out-of-control inflation. Sugar is often a lead indicator. If futures clear and hold over 13.00, that’s a clue.
More on Bonds:
Powell knows all too well that lowering rates could give us hungry commodity traders a bonus. So, if he holds rates at current levels and the dollar declines, bullish for commodites. If he does anything more dovish, very bullish for commodities.
We believe Bonds have very little room to the downside and lots of room to continue to rise.
Megatrends do not go away. Therefore, we look to those in infancy. Here are 5 for now.
Political unrest-with tempers flaring both around the world and here in the U.S., we are not happy to report that a “revolutionary” type of environment could very well increase this coming year. This will have a negative impact on most equites. And a positive one on commodities.
Marijuana-with legalization spreading, and the farm bill helping the hemp and CBD business world, there will be opportunities there. Watch the giant beverage, food, and tobacco companies to be on the lookout for smaller cannabis companies they can buy.
3-D Printing-if the industry can figure out how to make it more cost effective, there is huge potential in this space. We believe this is a socially conscious way to look at investing as many of the innovations are for the betterment of mankind.
Environmental factors-Weather-related disasters are not going away. Watch for opportunites in alternative energy.
Alternative currency-As banking stocks decline and the younger generations look deeper into more virtual ways to make money, bitcoin, or some derivation, is still in infancy and could begin to emerge next year.
I will have much more as we begin the New Year.
For now, the economic Modern Family (Russell 2000, Retail, Semiconductors, Transportation, Biotechnology, Regional Banks) have reliably guided us into the current bear market. Should the picture change, one need not look any further than to these 6 instruments.
We wish all of you a very happy holiday and a healthy, prosperous and joyous New Year!
S&P 500 (SPY) If cannot retake 245, then a brief stop at 235. Should things continue downwards, 220 next.
Russell 2000 (IWM) 126 some support-a move over 130 would be great and under 126, 121 next
Dow (DIA) 206-200 is the best underlying support. 245 now major resistance.
Nasdaq (QQQ) 140-142 is support and should that break hello 134. Has to clear back over 155 to get interesting
KRE (Regional Banks) 43.70 support. If that breaks, see 40.00. Back over 50, new ballgame
SMH (Semiconductors) 83.00 is a retracement to a channel that goes way back. If it holds, and this clears 87, then maybe we have a bottom. If 83 breaks, 75 next.
IYT (Transportation) 160 was our target. Although it traded below that, it closed right around there. That means what IYT-best tell. If it breaks 160. 150
IBB (Biotechnology) the 80-month moving average comes in 89.50-last big support.
XRT (Retail) 40 now resistance. I remember in 2017 talking about a double bottom at 38.00. That was so one and half years ago. Maybe it will hold-do I hear triple bottoms?
GLD (Gold Trust) the dollar hurt this-but keep watching with 117.50 line in the sand suport
GDX (Gold Miners) Keep 21.10 in your minds-of that breaks this should go to 21.85 next
SLV (Silver) 13.58 pivotal support-see notes
USO (US Oil Fund) Not seeing anything for now
TLT (iShares 20+ Year Treasuries) 121.50 pivotal-if cannot take this back, watch 120 for support
UUP (Dollar Bull) 26.04-25.76 trading range still since it closed at 25.77