Is the Market Spiraling Towards Death or Rebirth?

February 27, 2019

Mish's Daily

By Mish Schneider


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I photgraphed this in Bluff, Utah near the San Juan River.

In Native American cultures, “The spiral seems to tell a story about the labyrinthine journey of life and death and speaks of the possibility of rebirth.”

“Each loop of the spiral progresses us to a higher level, yet always returns us to the same place. It demonstrates life renewal by returning to the source.”

Simply put, death brings new life.

In market terms, did this relatively shallow selloff create enough of a spiral to bring the market to new life?

Yesterday, we covered the Economic Modern Family.

The takeaway was that on the weekly charts, in Russell 2000 IWM, 157 is pivotal and in Transportation IYT, 189.62 is pivotal.

Today, IWM traded back above 157 while IYT did not manage to rise above its level or 189.62.

Moving on, Retail XRT is holding well above its 200-WMA, trying to see if it can get to the upper resistance at the 50-WMA or 46.80.

IBB cleared the 50-WMA and today, rallied to over 114, putting some distance between current price and the underlying support at 109.90.

KRE also closed green. So now we wait to see if it can get to and clear 58.30, the overhead 50-WMA or fail 56.00 and head south.

SMH has had a 3-day correction. It is still far from its underlying support at the 50-WMA at 100.60. 

What we see overall, is not enough death to create a perfect spiral that will create new life.

Furthermore, XRT, KRE and IBB are very much alive.

Not only have they not shown any signs of death, they have not even fallen ill yet.

On the other hand, SPY, IWM, IYT and SMH have shown weakness. But death?

Looking at the lessons of the spiral, presently, the market has not seen enough selling to bring it back to the same place or the place to buy.

With Transportation now under the 50-WMA, and as my bona-fide leader of the Family, it seems like it wants to return to the source before it is reborn.

Of course, we have yet to learn what that source or level is.

But what we do know is, that until IYT closes back above 189.62, the spiral could be far from taking us to a higher level. 

S&P 500 (SPY) If this wants more downside, it has to close under 277.75. Otherwise, we might see more a time rather than price correction.

Russell 2000 (IWM) 157 pivotal all around. And especially on a weekly close. With that said, a close under 156.50 should bring in more selling.

Dow (DIA) A close under 258.80 will bring more selling. Whereas, a return over 260.40 should bring back the bulls.

Nasdaq (QQQ) Holding the 200-DMA at172.10. As long as that holds, no spirals. A close under will be a sell point.

KRE (Regional Banks) 58.18 the 200 DMA overhead with 56 the best underlying support then 55.00

SMH (Semiconductors) 104 first pivotal support failed bringing this to the next support at 102 which held. There’s your near-term trading range.

IYT (Transportation) 189.62 failed, which if history serves us well, means more ugliness for the market-even if some instruments don’t know it yet.

IBB (Biotechnology) 109.83 the pivotal point. 115 major resistance

XRT (Retail) 44.62 pivotal support with 46.80 major resistance

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