I Love The Smell of Manipulation In The Morning

July 9, 2015

Mish's Daily

By Mish Schneider


After a discussion about China with my husband (and CEO of MarketGauge) Keith, we took our usual sides on the “for how much longer will the whole market hold up as the proverbial house of cards?’

Don’t get me wrong, we both agree about markets being rigged, blah, blah, blah. What’s new, right? Where we deliberate is on the impact of emerging news longer term as one’s trading influence versus sticking strictly to “life in the bubble” as a better indicator of how the market, by the time news circulates, is already focused elsewhere.

These discourses allow us to weigh the differing sides and viewpoints, hence give us pause or at least very careful consideration of where to put our portfolio’s (now super light) money.

No stranger to you or me by now, that is when I turn to our-wait for it-Modern Family!

So que pasa con La Familia Moderna?

Before I go on, I googled that in Spanish. Fascinating that I stumbled on a page called Concepto de la familia moderna. The essence of the concept is that the modern family has many different forms that modifies to reflect the ever-changing modern society.

Our Modern Family fluctuates to reflect the ever-changing status of the overall market. This year, making it even more tantamount to track the family as we are still in a humongous trading range, sticking to buying the leaders on weakness and the selling laggards on strength works.

Which brings me to what started the 2015 rally-The Russell 2000 and Regional Banks (KRE).

If the Russell 2000 (IWM) is true to the longer term trend after breaking out from a yearlong consolidation in 2014, then IWM holding over 120 is logical with a second run for a match and possibly a takeout of the 2015 highs still probable. Under 120, everyone off the good ship.

Regional Banks (KRE) over 40.00 took out its yearlong consolidation from 2014. And really, one can say the move got legs over 42.00. The run to new highs gained momentum on June 3rd when it gapped higher and kept going. The low of that move was 42.65. Wednesday’s low was 42.74. Again, thinking logically, as a leading sector, this should hold and continue its ascent after the substantial correction.

More neutral to positive right now are Biotechnology and Retail. Semiconductors, still a concern, had a dramatic fall to the 2015 lows and thus far is holding them. Transportation looks as if a scab could develop on its recent bleeding cut.

A few weeks ago I wrote about John Nash’s Equilibrium Theory. “No single player can obtain a higher payoff than the other opposing player given that the outcomes are equally unknown. To put this another way, those outcomes are like trying to ascertain which came first, the chicken or the egg. It’s unpredictable.” 6/24/15 Daily

If KRE and IWM came first, logic dictates to watch if both the chicken and its egg can cross the road or go splat.

S&P 500 (SPY) Volume remains notable with a second break of the 200 DMA spelling caution.

Dow (DIA) 173.71 a major weekly moving average now that this is under the 200 DMA for a second day. Really, a move over 178 is the white knight this needs to save it

Nasdaq (QQQ) Seems destined to go to the 200 DAM unless this 106 holds once again and we see a return over 107

Volatility Index (VIX) Looking at daily, weekly and monthly charts, on the daily, 2015 highs 23.31-overbought on the short term RSI, weekly showing overbought as well. Most significant-monthly chart show no close over the 80 month MA since 2012 and only once that year. That number now is 20.94. Conclusion-somewhat bloated at these levels and nearing historical resistance

XLF (Financials) Financials are holding relatively. 24.12 key support

SMH (Semiconductors) Oversold and marginally holding 2015 lows. 49.90 or so is the target.

IYT (Transportation) Inside day near the lows of this move

IBB (Biotechnology) Inside day and still holding the 50 DMA-this and KRE the family leaders

XRT (Retail) 96.00 underlying support and over 100 this will have new life

IYR (Real Estate) 74.54 the 50 DMA resistance overhead

XHB (US HomeBuilders) Not in the family but in a bullish phase

GLD (Gold Trust) Held 2015 lows, best we can say for now

SLV (Silver) Possible island bottom if this does not break beneath 14.62

USO (US Oil Fund) 18.00 is the number to clear or this was just a couple of day correction

TLT (iShares 20+ Year Treasuries) Under the 50 DMA-as confused as the FED must be right now

UUP (Dollar Bull) support at 25.00

FXI (China Large Cap Fund) Possible island bottom if this does not break beneath 40.20

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