February 12, 2018
By Mish Schneider
Mother Nature has a funny way of presenting herself. After a long period without moisture, Santa Fe finally got some snow.
Similarly, the market has a funny way of presenting itself.
After a period of fierce selling, the market finally got some buyers.
If you live to take snapshots of unique moments in time like I do, then you always have your finger on the shudder just in case.
Today’s market action had the buyers out with many fingers on the shudder to capture the beauty of this rally.
Some of the key areas that needed to clear did.
For example, NASDAQ 100 had its breakdown on the weekly charts under 158.
Today, QQQs traded up to 159.95 and settled at 158.98.
Semiconductors had its breakdown on the weekly charts under 100.20.
Today, SMH traded up to 100.43 and settled at 99.74.
Although QQQs performed better, neither SMH nor QQQs, nor any of the other 3 indices, improved in phase from warning to bullish.
The Russell 2000 (IWM), Brick and Mortar Retail (XRT), and Transportation (IYT) rallied along with everyone ese today.
Yet, none improved in phase, remaining in a warning one.
Did the longs just get screwed right before the rally melts away?
Looking at the other key sectors of the Modern Family, Biotechnology (IBB), managed to improve from a Distribution phase back into a warning phase.
That means, IBB has crossed back over the 200 daily moving average. IBB’s recent range (over the last 2 weeks) is 119.30 high and 101.02 low.
As I’ve mentioned in the past, IBB is up there as one of the most highly speculated sectors-hence, big brother’s part in the Modern Family.
Therefore, no wonder we see an $18.00 trading range between the top and the bottom of the last 2 week’s trading range.
Simple math is that ½ of that range or $9.00, is an expected bounce off the lows. That puts a 50% retracement from the lows back towards the highs at $110.00. Today’s high $108.40.
As written over the weekend, “We are not expecting IBB to fly like a new fandangled helicopter, but an old relic with a facelift would be nice.”
Going back to IWM and IYT, curiously, both confirmed reversals from last Friday’s lows. Retail had confirmed its reversal on 2/7.
To gauge if this rally will hold and lead the indices along with the Modern Family back to bullish phases remains to be seen.
The slopes on the overhead 50 DMA’s that all must close above, now have negative slopes.
Elsewhere, interest rates eased a tad, as did the US dollar. Most Commodities also rallied.
Finally, the S&P 500, as it did when it first started to crumble, continues to play a major role.
Should tomorrow play out as turnaround Tuesday, then SPY never clears 267.09 (the weekly MA it failed after 10 months). Instead, should SPY fail under 263, that gives the longs fair warning before they get a snow job.
S&P 500 (SPY) I’m happy to see this move higher if it can. However, 267.20 is the weekly chart breakdown it held for 15 months. If it can clear, we still have lots of resistance. If cannot clear, I suspect more sellers will appear.
Russell 2000 (IWM) 151.50 major overhead resistance. The longer it holds 145.50 the better.
Dow (DIA) 245.50 is pivotal. If this holds great. If not, I’d be defensive
Nasdaq (QQQ) 155.25 pivotal. 160.50 the 50 DMA resistance