September 15, 2020
By Mish Schneider
Is the market correction over?
Although a 10-15% correction is normal, the bigger question is whether the bounce we just saw from recent lows is a sell rather than buy opportunity?
Both SPY and QQQs are trading into resistance.
In SPY that number is 342. In the QQQs we are looking at 282.
The DIA has to hold 28,000.
Interestingly, volatility also closed green today which tells me, investors are nervous in spite of the slew of good news with the NVDA merger, vaccine hopes, and a China rebound.
Furthermore, the Fed meeting minutes will be released Wednesday.
The expectations are for a dovish stance.
What interests me is what they say about their plan for getting inflation up, which has yet to be defined.
Is there a possibility of another more a severe correction this year?
Without a stimulus plan from the government, although I believe it will happen in the final hours before the election, the market will get hurt.
Plus, the election and rising protests could hurt if the violence increases.
Moreover, a second wave of COVID is the most frightening possibility.
So, what should we watch for now?
The outliers are still the best “tell.”
Junk Bonds JNK have to hold around 104.80. High grade corporate bonds LQD should hold 135.50.
Perhaps the most important outlier is what happens to the dollar. A move in DXY or the dollar continuous contract under 92.80 could spark more buying in the commodities, but also more fear about the recent rally in the Chinese Yuan.
Volatility is yet another key as the index held the 50-DMA and over 26.00 could be an early warning sign.
For now, I am still very bullish in gold, silver, and miners.
I am also watching, with no position, a bullish bias in uranium and natural gas.
If the market holds, I still like some of the small cap growth stocks.
For example, I am watching Fastly (FSLY) for a move back over 84.00.
Otherwise, please watch the indices carefully here and if they start to rollover, I would raise stops and take profits on the winners.
Russell 2000 (IWM) 153 pivotal 150.75 key support
Dow (DIA) 280 pivotal 274 key
Nasdaq (QQQ) 282 resistance 275 support 272 must hold
KRE (Regional Banks) Could not confirm a recuperation phase so back to bearish
SMH (Semiconductors) 171.50 support 175 resistance
IYT (Transportation) Strong relative to the other sectors. Must hold 200
IBB (Biotechnology) Sitting right on the 50-DMA at 135.90
XRT (Retail) 49.00 the 50-DMA
Volatility Index (VXX) Eyes here tomorrow especially if VIX clears 26.00
Junk Bonds (JNK) 104.80 support
LQD (iShs iBoxx High yield Bonds) 135.50 support