Old Horse Knows The Way

March 1, 2015

Mish's Daily

By Mish Schneider


Story by Han Fei Zi Guan Zhong accompanied Load Huan of Qi in attacking Guzhu. Spring passed and winter returned, and they became lost on the wrong road. Guan Zhong said: "We can use the wisdom of an old horse. Release the old horses and follow them, and thereby reach the right road."

As per last week’s relatively mild and flat price action in the 4 indices, what started out for me as a fun and poetic way to describe the market using the Chinese Zodiac’s Year of The Goat/Sheep/Ram (In Chinese, the word means all three), wound up becoming more of a fascination once I began to drill down.

Although the origination is hard to pinpoint exactly, records show that since the Han Dynasty 206 BC-220 AD, the 12 Earthly Branches have been used to record the time of day. However, for the sake of entertainment and convenience, they were replaced by the 12 animals. In Buddhism, legend has it that Buddha summoned all of the animals of the earth to come before him before his departure from this earth, but only 12 animals actually came to bid him farewell. To reward the animals who came to him, he named a year after each of them. In modern times, the Chinese Zodiac remains popular in several East Asian countries including China, Vietnam, Korea and Japan.

Adding up the total population of those 4 countries based on the 2013 consensus, we are talking about over 1.624 billion people! And that does not include people of Asian ancestry who have emigrated to other countries.

So, think about it. 1.6 billion + People who share in a belief that is around 2300 years old. Who am I to argue with that?

Seriously though, if one believes that collective consciousness moves energy, then if nothing else, one must at least respect the self-fulfilling possibilities. After all, it worked incredibly well last year with the horse.

Looking at commodities, the 4 I focused on last week: The Commodity Index (DBC), Oil, (USO), Gold (GLS) and Silver (SLV) all closed up for the week except for USO. None had the volume to suggest, however, that “smart” money came in to buy.

Therefore, for this coming week, look for continuation to the upside in the commodities only without a big commitment until we see volume. Furthermore, expect the indices to continue their grazing, scattering and grazing pattern until “fresh” news emerges. (Read below for signs to watch for)

S&P 500 (SPY) A gentle step down to support at the 10 DMA and S1 at 210.35

Russell 2000 (IWM) Possible reversal candle with light volume so unless it opens and closes weak, assume just a minor correction

Dow (DIA) Also a possible reversal candle especially if breaks 180.85

Nasdaq (QQQ) Inside and no real reversal pattern therefore, eyes here to lead which will help the other 3.

XLF (Financials) Continues to elude 24.90 the January Calendar Range high to clear, and basically in a range between 24.50 and 24.15

KRE (Regional Banks) 41.06 the January Calendar Range High to clear which is getting a bit old as we get into March but rules states good until June

SMH (Semiconductors) Consolidating

IYT (Transportation) We can say for now it failed the 165.17 January high Calendar range

IBB (Biotechnology) Muscle man went spinning instead of pumping

XRT (Retail) Look here and we surely make a case for more upside

IYR (Real Estate) Finding some support

ITB (US Home Construction) Found support on Friday near the fast moving average. Look's ok!

GLD (Gold Trust) Noise unless it clears 116.90 convincingly SLV more interesting if clears 16.05

GDX (Gold Miners) Nice move but with light volume

USO (US Oil Fund) Inside day with 18.00 pivotal

TAN (Guggenheim Solar Energy) Did not get a weekly close over 39.60, but was a great monthly close

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 128 key support and can still get up to 132

UUP (Dollar Bull) In a channel but at the top of it

EEM (Emerging Markets) Has to clear 41

EWG (Germany) Like as it long as it holds 29.50

FXI (China Large Cap Fund) long term bullish

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