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February 12, 2015

Mish's Daily

By Mish Schneider

Snoop Dog

Finally (and happily) we can say that the Fab Four (SPY, DIA, QQQ, IWM) took out the January 6 month calendar range highs.

It took 28 days for SPY and QQQs, 29 for IWM and DIA. To review the interpretation of what this means for the market, we can solidly look now at a bullish bias until July. Does that mean the market will have 2013 dramatic rallies?

I rather suspect the market will more likely see small rallies met with selling. Those dips from profit taking or short sellers will give us periods of consolidation. They may look painful at first for the longs, but unless we fail these calendar range highs in the next week, assume sell-offs are good buy opportunities. I would also use much tighter reins when buying strength.

Most fascinating right now are both the Volatility Index (VXX) and the 20 year Long Bonds (TLTs). Both are sitting on major inflection points.

VXX dropped right down into the converging moving averages after its earlier golden cross to a bullish phase. Although not into buying a falling knife, if the area of 31.20 holds and it clears back over 31.75 assume that the small rally we just had in the market will be met with selling on Friday ahead of a long weekend.

The TLTs held the 50 DMA and rallied a bit into 130.50 resistance. If that breaks 129.24 there should be follow through to the downside. Over 130.50, see a move to 132.50 next.

Usually, I reserve the daily commentary for exactly that, commentary. This time though, I am compelled to write more analytically. Oh please don’t think it’s because I’m trying to woo or impress anyone, or put my neck out on the chopping block.

Au contraire. You, my readers are a mirror. I share with you my musings and now I share my trading plan for both tomorrow and going forward given the assumptions from the breakouts over Calendar Ranges in the indices and how interest rates and volatility might fold into the mix.

“Get your facts first, then you can distort them as you please.”
Mark Twain

S&P 500 (SPY) New highs and not running rich yet but remember what I said about rallies, profit taking and consolidation Bullish Phase

Russell 2000 (IWM) Cleared the January Calendar Range making 120.56 pivotal

Dow (DIA) 179.23 the January Calendar Range high which is now pivotal

Nasdaq (QQQ) 106.25 was the multi-year high we saw in November. The gap low from Thursday should now hold

XLF (Financials) 24.90 the January Calendar Range high

KRE (Regional Banks) 41.06 the January Calendar Range high

SMH (Semiconductors) 56.64 resistance from December

IYT (Transportation) Double the average daily volume but not near the 205.16 January high

IBB (Biotechnology) More sobering move with an inside day

XRT (Retail) Cleared 96.85 which is now pivotal

ITB (US Home Construction) New multi-year highs