November 3, 2018
By Mish Schneider
A little background on how I find inspiration to write the Daily each day.
It begins with my taking a photograph with my iPhone of something I think might be useful at a future date. A metaphor if you will.
Then, I scroll through the photos saved and stop at one that seems appropriate to use given that day’s market action.
Today, the Red Queen photo resonated.
When I googled for info on her I found this quote, “It is far better to be feared than loved.”
That quote resonates with me.
The market, after the 2-day tradeable bounce, by the end of the week, felt more fear than love.
With tweets about a deal with China feverishly changing from minute to minute with:
Yes, a deal is in the works, to:
No deal is in the works,
Fear dominated every attempt at a rally.
Bulls will argue that Friday was healthy digestion.
Bears will argue that the red day means the bounce is over.
That leaves them both with their heads still on.
Who should worry when the Red Queen commands, “Off with their heads?”
For consistency’s sake, we look at our triage, interest rates, U.S. Dollar and Oil.
TLTs, as one would expect, fell hard after the solid jobs number. After all, this only emboldens the Fed to keep raising rates.
The Dollar as measured by the ETF UUP, gained in strength.
Although UUP left a big gap down from the peak high at 25.88 last Wednesday, that it held above the fast moving average keeps the uptrend intact.
That is, unless UUP fails under 25.62. Then, the dollar will sink further.
USO, the US Oil Fund failed to close above 13.50 the 50-week moving average.
The mightier 200-week moving average support is just below at at 12.81. Hence, the fate of oil prices remains a bit murky.
Perhaps the market is getting used to higher rates and is beginning to believe the Fed’s optimism.
Should the Dollar start to fail though, that sentiment will shift.
A combination of rising wages, higher borrowing costs and a weakening dollar will renew fears of potential inflation.
In the meantime, the Modern Family sent mixed signals.
Regional Banks, Biotechnology, Retail and the Russell 2000 closed green, with Retail the largest percentage gainer.
Semiconductors and Transportation closed red.
It appears that most of the Family feels like Alice (in Wonderland) did when she told the Red Queen,
"Why, I do believe we've been under this tree the whole time! Everything's just as it was!"
S&P 500 (SPY) 270 support and 275.00 area big resistance. Plus, let’s not forget it’s the second week closing under the 50-WMA
Russell 2000 (IWM) Could not close above last week’s high 154.45. But, did lead the indices as the only one that closed green. 149.50 is key support156.35 the closest resistance point
Dow (DIA) Held 250.54 the 50-week MA which make it stronger than IWM and SPY
Nasdaq (QQQ) 172.25 the 200 DMA resistance. Second week this closed under the 50-WMA. 167.80 next support to hold
KRE (Regional Banks) Best hope for more rally if 53.69 holds, is a move over 55
SMH (Semiconductors) 94.90 key support on the 23-month MA. 104 big resistance.
IYT (Transportation) 181.83 23-month MA support with 194 big resistance
IBB (Biotechnology) Managed to clear the 200-week MA at 104.72 and marginally the 23-month MA at 106.80.
XRT (Retail) Ended the week well with now 47.80 the support to hold
Every day you'll be prepared to trade with: