July 19, 2015
By Mish Schneider
Last Thursday, July 16th was the kick off of the new 6-month Calendar Range. That means that the highs and lows from July 1st to July 15th are now the range to regard until next January.
The week ended with increasing diversity among the four indices, various sectors and groups, and most strikingly to me, among the Modern Family.
Although NASDAQ traded in a parallel universe (had a runaway gap on Friday), what I suspected might happen seemingly did happen. The big corporate profits in Google and Neflix juiced Apple. Amazon and Facebook hence thrilling shareholders, but had virtually no impact on the “meat and potatoes” of what drives the US Economy.
At the risk of sounding like a nagging mom, the members of the Modern Family- IWM, XRT, IYT, KRE, SMH and IBB-are members because they continue to offer the most succinct way for us to gauge the true US Economy.
The Modern Family measures the performance of smaller cap companies, goods moving across the country, consumer sentiment, and local banks. (IWM, IYT, XRT, KRE)
Semiconductors and Biotechnology are in the mix as both sectors are excellent assessors of speculative interest.
If we use the 6-month calendar range as yet another layer, only Biotechnology in the Family closed above that range in spite of NASDAQ’s performance last week. Biotechnology has been awesome, but like the larger cap corporations, does little to help the US mainstream economy.
Incidentally, the S&P 500 also did its best to hold up the fort.
Throughout the 2015 market ups and downs, in addition to our Complete Swing Trading System rules, there are a couple of other principles that factor into our swing trading decisions.
Besides referring to the Modern Family’s interrelationships, the Chinese astrological 2015 Year of the Sheep or large perimeters of the trading range yielding a counterintuitive bent-sell at the highs, buy at the lows, has helped.
Secondly, I confirm the validity of that bent if relative strength indicators (overbought/oversold) and volume patterns (blow off tops/bottoms) support it.
Furthermore, before this earnings season had begun to wow us, the yearlong breakout of the Russell 2000s from 2014 over 120 reminded me to step back and look at the bigger picture.
With that said, I do believe we have enough to look at and think about without the complications of what the Fed might do, where Greece and China wind up and so forth.
Will the extraterrestrial QQQs hold? Will SPY break the 2015 Trading Range highs? Where will investors that are booking big profits in the NASDAQ and Biotechnology leaders park their money next?
Does that mean IWM will catch up? If QQQs and/or SPYs falter, what might we anticipate for the rest of our other already lagging family?
S&P 500 (SPY) Positive that the gap up last Thursday was not only defended Friday, but saw a bit of higher close.
Russell 2000 (IWM) For now, considering Friday’s weak action noise unless it breaks under 124.50
Dow (DIA) Like IWM, noise here last Friday until it breaks 179.60
Nasdaq (QQQ) Runaway gap. Over 112 keeps it
XLF (Financials) No more runaway gap but still a solid close for the week
KRE (Regional Banks) 45.00 next resistance to clear on a closing basis with support at 43.98
SMH (Semiconductors) Inside day. If semis can gain traction the market could get more wholly exciting. 54.60 is the 200 DMA where excitement awaits
IYT (Transportation) Good close to week with the overhead 50 DMA resistance
IBB (Biotechnology) We do love when big bro gets his B-12 shot
XRT (Retail) Granny can use some of that B-12. 100 pivotal. Over 102.50 it’s golden
IYR (Real Estate) One of the ugliest confirmations of a recovery phase
XHB (US HomeBuilders) Disappointing action but did hold the 50 DMA
GLD (Gold Trust) Huge volume on the move lower and oversold. Blow off possible but no signs of it yet
SLV (Silver) Holding 14.02
GDX (Gold Miners) RIDICULOUSLY oversold and on new all-time lows
USO (US Oil Fund) Aside but always watching for signs of life
UNG (US NatGas Fund) Most interesting with a good end of week comeback-worth watching over 14.05
TLT (iShares 20+ Year Treasuries) Unconfirmed phase change to recovery
UUP (Dollar Bull) In the sea of interesting relationships, there is also a strong dollar
EEM (Emerging Markets) 39.00 pivotal
Every day you'll be prepared to trade with: