June 1, 2014
By Mish Schneider
When one watches as many instruments as I do, on choppy end of month-end of week days such as the one we saw last Friday, one can go a bit mad analyzing the divergences and reason on why this one and not that one!
And that applies to both longs and shorts! For example, why were the Financials strong and the Regional Banks weak? Why did Wal-Mart (WMT) rally and Kohl’s (KSS) sell off?
Why did the Dow (new high close) and S&P 500 make yet another new high while the small caps crept back beneath the 50 DMA? Ok, we sort of know that answer as the small caps have been aptly named this year as such-small.
The basic answer I and many other traders give as we shrug our shoulders is, “Rotation. Rotation, Rotation.” But maybe we are better off saying, “Location, Location, Location” as in its where your money sits with explicit rules and reasons why you put it there followed by a little bit of luck when those reasons pan out to boost your portfolio.
Be that as it may, here’s where I am looking for next week’s version of musical chairs. The Russell 2000s have to sit right here and really, go no further south side. Semiconductors need to clear the 2014 highs once and for all. Retail, which made a good comeback, has to stay over the moving averages and clear 84.00. Financials and particularly the Regional Banks, need to continue to firm. And SPY and DIA can take a rest-would do them good!
S&P 500 (SPY) Day 4 of the breakaway gap, Nice-now take a break!
Russell 2000 (IWM) Unconfirmed warning phase-has to stick over the 50 DMA once and for all or signs of trouble. However, it did hold the gap from the week prior and last week’s good start.
Dow (DIA) New high close but not through 167.29
Nasdaq (QQQ) New highs then a doji day close-looks good and one we can stick with
XLF (Financials) Over 22.32 looks a lot better
SMH (Semiconductors) 46.59 the high of 2014 to clear
IYT (Transportation) 2 shooting stars-could there be more???
XRT (Retail) Unconfirmed Accumulation phase which has to stick
IYR (Real Estate) New high close
ITB (US Home Construction) Looks nothing like IYR therefore want to see this do something as well
GLD The gap lower last Monday sure set the tone after 1 & ½ months of consolidation-textbook pattern to look at
USO (US Oil Fund) not as strong but not weak either
OIH (Oil Services) Another new 2014 highs
XLE (Energy) Still looks really good after an inside day Friday
XOP (Oil and Gas Exploration) Inside day
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Maybe a reversal from new highs, we have seen this before but not for very long-here goes my “Boy Who Cried Wolf” Theory-one day!!
KRE (Regional Banks) If this clears the 200 DMA, could see some nice catching up
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