August 14, 2016
By Mish Schneider
Although one assumes the Bull the victor given the caption, “Hats Off To The Bull,” I find it difficult to tell whose blood has fallen. The red cape fans out from the Matador’s hand in a fiery fashion. The Bull cries a tear filled with blood. Both Bull and Matador are on the ground. The Bull’s eyes are open, the Matador’s shut.
Much the same can be implied for the stock market’s action last week. Certainly, hats off to the Bulls who drove the market to new record highs!
If the Matador represents the Bears, indeed many fell to the ground with eyes shut. However, Bears continue to clutch their capes and swing it over the Bull’s head. In fact, some famous Bears arose last week.
J.P Morgan, Goldman Sachs, and Carl Icahn are just three names broadcasting that the market will have a “major drawdown.”
Citing everything from lackluster economic growth to global concerns to an unsustainable Central Bank interest rate policy these Bears do merit concerns that could make Bulls cry blood.
Will the Bulls fall under the fiery cape of the Bears? Or have the Bears lost their ‘Montera” (hat) to the Bulls?
Last week I featured the ETF TLT or the 20+ Year Treasury Bonds. Although TLTs closed up on the week, the short play or rise in rates the monthly chart suggests might happen has yet to confirm or deny.
With last week’s decline in gold and silver, one can intimate the expectation for higher rates. The reality of that occurring though, remains the wild card for 2016.
Also last week, our Modern Family went for a ride in San Miguel’s’ Protective Services Inc. blue Chevy. They emerged from the car in the same way they entered it. Divergent.
One might imagine that our Prodigal Son of the Modern Family Regional Banks (KRE), would experience the most significant renewal of faith after riding around with a powerful Patron Saint.
Nevertheless, KRE closed down on the week. It’s holding a key weekly moving average and sitting on a key monthly one. In light of the big banks’ negative stance, the Bulls need this Financial ETF to commit.
Sister Semiconductors (SMH) with her Bullish strength continually use those long horns to administer harmful blows to the Bears thus drawing blood.
Meanwhile, Transportation (IYT) reflects another one of the Bear’s concerns-lackluster economic growth. Trannies Big Brother Biotechnology, echoes more the recent confidence by many other investors. IBB closed the week out lower, yet above the major weekly moving average.
That leaves our Patriarch and Matriarch, the Russell 2000 and Retail. IWM closed basically unchanged from the week prior. Good news actually as he is lagging behind the other indices. Granddad must not only prove he can take on the Picador, but that he can also stun the Matador.
Grandma Retail, quiet until last Thursday after a slew of better-than-expected earnings, knocked the banderillas (sharp barbed sticks) right out of the hands of the Bears. If XRT can clear the April 2016 high, then that will raise the GDP expectations for the next quarter.
A move which could fatally gore the Bears leaving the Bulls triumphant.
S&P 500 (SPY) 217.25 support. Do I hear 220?
Russell 2000 (IWM) Defended 122. Now pivotal number with 123.53 big resistance and 121.40 support
Dow (DIA) Monthly chart overbought so looking for around 188 max on this move. 185 support
Nasdaq (QQQ) 116.10 support to defend.
XLF (Financials) January high of 24.27. 23.70 area is now pivotal support
KRE (Regional Banks) 40.00 support. 42.00 first big resistance
SMH (Semiconductors) Another new-high close
IYT (Transportation) Inside day. 138.60 weekly support to hold. Back over 142-way better
IBB (Biotechnology) Defend the weekly MA. 285 now the big support. Over 295 should continue north
XRT (Retail) 46.50 big resistance
IYR (Real Estate) The reversal pattern from recent highs working with 82 support
GLD (Gold Trust) Since I do not like to buy strength, I am not yet discouraged by last week’s weakness
SLV (Silver) Back to looking at 18 support
USO (US Oil Fund) 10.85-11.00 a wall of resistance
TLT (iShares 20+ Year Treasuries) 138.00 the 50 DMA which it’s been above since June 1.
UUP (Dollar Bull) Needs to clear 25.06 to keep going
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