December 2, 2018
By Mish Schneider
A couple of key levels may have the bears meditating about a long sleep.
Yet, before they go into hibernation, there are also key levels that could leave them awake and refreshed come the dawn.
All this past week I focused on the economic Modern Family and particularly the Transportation sector or IYT.
I posted a weekly chart of IYT as well as discussed the game plan for traders, depending on where IYT closed on November 30th.
In essence, if IYT closed above the 50 weekly moving average, we surmised that that could be the start of a much larger rally into December.
However, IYT needs the other members of the Family to join in.
Oh yes, IYT is key.
After all, as the sector that moves and delivers goods, IYT is one of the best measures of the real state of the economy.
All IYT had to do was close above the 50-week moving average or 193.86.
Clearly, that helped pull the rest of the Family up. However, was that enough?
Before we go into the action of the rest of the Family, I want to take a moment to revisit what we call the “triage” of market influences.
Treasury Bonds-using TLTs, closed the week in a recovery phase and have bounced well off of the 112 support and Powell’s dovish statements.
Nevertheless, TLTs are nearing resistance just over 116.
Furthermore, the implications of a dovish Fed is not a good thing. It could spark inflation, not to mention the “read between the lines” lack of confidence in the economy.
Secondly, the dollar refuses to die. After Powell’s statements, the dollar dropped. So here is an anomaly. The rates eased, but the dollar, after the initial drop, proceeded to firm.
Who is right?
Does the market need a pause on rate raises because the economy is slowing down? Or, is the flight to safety in U.S. dollars because the economy is really strong?
Meditate on that!
Last of the triage, crude oil reached $50 a barrel and has had the worst decline in price since a decade ago.
Is this a sign of a global economic slowdown? Again, who is right-the easing rates, falling oil prices or the rising dollar?
Add that all up, and Transportation could be only temporarily happy.
Looking at the rest of Modern Family, the second best performer was Big Brother Biotechnology IBB. IBB cleared back over the 200 week moving average. Yet, it remains under all the daily moving averages.
It’s no secret that this is the most speculated sector. Hence, it measures public sentiment, but that does not translate into “the public is right.”
Granny Retail XRT, featured in my interview with CEOMONEY, had a death cross on the daily chart.
XRT did not come close to 47.54 or where its 50-WMA sits.
Neither has the Russell 2000 IWM, Semiconductors SMH nor Regional Banks KRE.
What does this mean for next week?
Something has to give.
Either IYT fails and this was nothing more than a bull dream in a bear market.
Or, we wake up Monday to see the market gapping way higher, thereby boosting the Family’s laggards.
Regardless, do not forget about the triage. One slip of the tongue from the G-20, Powell, Mueller, Trump, Xi or Putin can act like a sedative or adrenaline for the bears, the bulls and the overall market.
Perhaps some of you did not watch the recent video I did with CEOMONEY. Please Click here to see the interview
S&P 500 (SPY) This cleared back over the 200 DMA and the 50 WMA. That makes 276 uber pivotal for Monday.
Russell 2000 (IWM) Still by far the weakest which is concerning. By the time (if it does) this gets to its 50 WMA at 159.50, it’ll be time to go short. And now must hold 150.50.
Dow (DIA) Rallied right to the 50 DMA resistance at 255.65
Nasdaq (QQQ) Did not close out the week over 170.60 (the 50 WMA) therefore, trouble still looms
KRE (Regional Banks) 55.00 pivotal support
SMH (Semiconductors) Got the close over 94.60 so now that is the support area to hold. 97.14 the 50 DMA resistance
IYT (Transportation) Ok-did its job. Now, 193.87 area huge support to hold
IBB (Biotechnology)111.14 is where this 50 WMA lives
XRT (Retail) 45.00 pivotal support with 47.50 resistance