A Ewe-Turn

July 28, 2015

Mish's Daily

By Mish Schneider

As much as I enjoy writing in metaphors (and surely the garden deemed appropriate for Tuesdays session with orchids, stalled produce and wilted flowers), the overriding and mightiest metaphor so far for 2015 is the Year of the Sheep or sheep pasture representing a large trading range.

Looking at the range in 2015 for the S&P 500, the February low was 197.86 and the May high was 213.78. Incidentally, the December 2014 low was also 197.86-interesting. That range is palpable and really, the reason why the sheep theory based on the Chinese Astrological symbol for 2015 (the Sheep) came to light.

Stepping back at the broadest indicator-the 2015 trading range has to break one way or another in order to consider the longer term bias of the market a game changer.

Looking at the July 6-month calendar range for SPY, the high is 211.28 (even though it traded higher thereafter) and the low is 204.11. We can call that the range within the Sheep Pasture range. If that breaks one way or another, we should see follow through which could become significant. However, with the 2015 range lows and highs beyond the calendar range borders, I would call it busting fences but not necessarily a game changer.

Finally, looking at phases and the SPY, it has wavered between a bullish and distribution phase, currently trading in a warning phase. The basic premise of determining phases uses the 50 and 200 simple DMAs, where they sit on a chart in relation to one another, the slope of the moving averages and where the price of the instrument falls.

As the words phases and cycles may be used interchangeably, it stands to reason that a cycle will eventually complete. Using 6 as the total number of phases, SPY has visited 3 thus far. Logically we can conclude that eventually it will turn to a bearish phase.

Nevertheless, the timing of that is key and since we have seen 7 months go by with SPY in 3 different phases, your guess is as good as mine as to how long it might take to get to a bearish phase. We can feasibly see SPY return to a bullish phase first.

Although I chose SPY as the focus for this commentary, each index, sector, equity, commodity and foreign exchange mimics the exact same layers-2015 range, 6-month calendar range and phases, my Modern Family (IWM, XRT, IYT, SMH, KRE, IBB) no exception.

S&P 500 (SPY) Good volume on the bounce off the 200 DMA. 210 area resistance

Russell 2000 (IWM) Possible reversal pattern after failing then flying over the 200 DMA. Granddad not ready to pack it in just yet

Dow (DIA) Possible reversal pattern here as well only weaker as not over the 200 DMA at 177.39 now resistance

Nasdaq (QQQ) 112.10 area resistance with 109.79 support

XLF (Financials) 25.30 next resistance to see what this has with Wednesday the FED day

KRE (Regional Banks) I like the support at the 43 level and if we can see a move over 43.90 should continue prodigal son status

SMH (Semiconductors) Good reversal pattern off the lows with volume. Hard to stay mad at the family

IYT (Transportation) More confirmation of the bottom with the 50 DMA the big one now to clear

IBB (Biotechnology) Doing its Big Bro thing

XRT (Retail) Not as strong a pattern as granddad IWM, but still held the 200 DMA. Has way more to prove though

IYR (Real Estate) Like this over 74.25 if holds there on Wednesday

XHB (US HomeBuilders) Back to an unconfirmed bullish phase

GLD (Gold Trust) Stalled

SLV (Silver) Can really go either way

USO (US Oil Fund) Bounced off the 2015 low for now.

OIH (Oil Services) Could be a reversal pattern if confirms over Tuesday high

XLE (Energy) An even better reversal pattern than OIH if confirms

TAN (Guggenheim Solar Energy) Sunpower reported well so should help this clear 36.50

TLT (iShares 20+ Year Treasuries) Fed day

UUP (Dollar Bull) 25.15 now support to hold

EEM (Emerging Markets) Maybe bottom-also up to the FED and dollar

FXI (China Large Cap Fund) Held 40.00. Something to be said for that

BAL (Cotton) Like this

PHO (Water) 23.16 and 23.17 both the lows this year held Monday then Tuesday, huge volume came in

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