March 26, 2019
By Mish Schneider
Komainu Lion-Dogs, originated during the Tang Dynasty in China, are Japanese statues meant to guard the inner shrine or temple.
They are not typically visible to the public.
With the recent price action in the market, if there are guardians at the inner sanctum of the stock exchange, they too are not so readily visible to the public.
I’ve written a lot lately about Semiconductors because that sector still leads the rest of the market.
However, even with that leadership, SMH has struggled to remain the Komainu for the bulls.
The weaker sectors that need protection, such as the Russell 2000, Transportation, and Retail, need a lion-dog like SMH to stay in the game.
It seems that the current confirmed topping patterns in Semiconductors, the S&P 500 and Nasdaq 100, are barely visible to the public.
Buyers continue to come in on every dip.
Last night I wrote, “Before I’d load up long on anything, I’d wait for any of these 4 (Russell 2000 IWM, Biotechnology, IBB, Retail XRT and Regional Banks KRE) to clear back over their 50-DMAs for a return from a bearish into a recuperation phase.”
Today, although they got close, none of them changed phases.
Can our Lion-Dog successfully ward off the evil spirit of a market top?
A little about topping patterns.
When an instrument makes a new 60+ day high, and then closes on the low end of the intraday range, we wait for confirmation the next day.
A confirmation is a lower close than the day before’s lowest price.
SPY and NASDAQ are classic examples.
As in the case of SMH, a topping candle can be a new 60+ day high, followed the next day by an inside day.
Then, the third day, we look for a close under the lowest price of the day it made a new high.
SMH is a classic example.
As mentioned yesterday, we measure an approximate target for an instrument that put in a topping pattern, by calculating a 10% drop from the high tick on the extended-up day.
On March 21st, SMH made a high price of 110.60.
If we subtract 10% from that price, we could easily see SMH fall to 99.54.
Same for SPY and QQQ.
Until SPY QQQ and SMH clear the high of the extended-up day, the topping pattern remains in place.
Where does that leave the bearish phases in IWM IYT XRT and KRE?
In the awkward position of having to take over the role as Lion-Dog to keep the market solvent.
Possible but, after the year 1600, wild boars were often substituted for the Lion-Dogs.
And in the Year of the Brown Earth Pig with a water element, that might not turn out to be so protective.
S&P 500 (SPY) Thursday a new swing high. Friday, a failure of Thursday’s low and a topping pattern on high volume in place. Monday, some digestion. Tuesday? Failed to clear the 10 DMA at 281.35.
Russell 2000 (IWM) The 50-DMA resistance is at 151.90 with support at 148.20, then 145.
Dow (DIA) 257.40 the resistance at the 10-DMA and support at the 50-DMA or 253.65
Nasdaq (QQQ) 178.75 is the 10-DMA and super pivotal. If cannot clear tomorrow, expect more downside with 172.70 the 200 DMA
KRE (Regional Banks) Unless this can clear and close over 50.95, today was just some short-covering
SMH (Semiconductors) 106.63 is the immediate resistance on a closing basis. Under 106.15, could see some more selling with best support around the 101-100 area
IYT (Transportation) Inside day here today. 183.90 is the overhead 50-DMA so lots of work to do if this has a chance of getting there
IBB (Biotechnology) In a bear phase but back over the 50-WMA at 110.25. Now pivotal
XRT (Retail) Resistance at 44.55 to clear and close above. Some support at 42.95, but if fails there, we are reversing a 10-year uptrend
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