November 15, 2018
By Mish Schneider
What does that mean?
The symbol for the Chinese New Year 2018-2019, is the Brown Earth Dog.
More importantly, Chinese astrologers point out that this past October, the element changed from fire to water.
With that, astrologers predict a bear market until fire returns in 2025.
On October 4th, the market reached new highs and collapsed from there.
Nevertheless, bulls heartily remain, as represented by our bull skull.
Today is a perfect example.
I saw many analyst calls that the completion of the Fibonacci sequence is here, and the market has bottomed.
Now, I love technicals as much as anyone.
In fact, I made a career out of it starting on the floor of the NY Commodities Exchanges.
However, I use TA to confirm or deny a fundamental situation.
What are the some of the fundamentals of the market now, and do the technicals confirm or deny them?
Issues with firming rates, rising debt and inflation, slowing global growth and trade wars remain.
The dollar, although closed green, looks a bit heavy.
But for today, the big topic fundamentally was tariffs.
Once again, the market responded by going up at the prospect new tariffs would be halted and fell as soon as that rumor was dispelled.
Now, let’s look at the technicals.
We will use the Russell 2000 IWM, the best measure of the US economy and sentiment.
It is in a bearish phase.
IWM came in a bit oversold.
It is below all the moving averages on the Daily, Weekly and Monthly timeframes.
On the 30-minute chart, the floor trader pivots are negatively stacked.
IWM rallied today and was the second-best index performer behind NASDAQ.
Yet, it did not clear R1. It did not change phase. It did not clear any moving averages.
Conversely, my Daily yesterday showed why metals make sense fundamentally.
With the dollar potentially vulnerable, global economies struggling, the U.S. losing world status, the risk of inflation should the Fed pause on rate hikes, where else are you going to go?
Yet, I would not buy gold GLD until it cleared the 50 DMA and confirmed the Recovery Phase. It did that today.
The bottom line is this.
Scalpers should have a party in this volatile tape.
Swing traders must wait for the best opportunities. That means the lowest risk if you are going long or short. If the risk is too much-pass.
Lastly, trade with the phase.
That means sell rallies once the rally fizzles on instruments with negative phases. And, buy dips once selling fizzles on instruments with positive phases.
This will help you avoid getting wet when the brown earth dog lifts its leg and sprays on the skeletal bull.
S&P 500 (SPY) Unless this closes the week over 275.30, today’s rally got us closer to a short with less risk.
Russell 2000 (IWM) 150.50 pivotal support. Overall, 154 big resistance so if 150.50 breaks, this rally was meager
Dow (DIA) Cleared back over the 50 DMA at 251. Pivotal support-also the only index that is still above the 50 WMA.
Nasdaq (QQQ) 170 resistance and 162.50 closest support. Also note this is back under the 50 WMA at 170.35.
KRE (Regional Banks) 55 is the big pivotal number for Friday.
SMH (Semiconductors) When SMH had its death cross on 10/4, the price was right at the MAs offering a low risk short. Rare & beautiful. Now, SMH could rally to the 50 DMA near 100, can even overtake it. But, can it clear 104? If not, you'll have a 2nd chance at shorting with a very low risk. And for now, must hold 94.00.
IYT (Transportation) Held 186.50 and could possibly setup well for a short if it cannot clear 193-195 while the 50 DMA declines in slope to meet the 200 DMA for a possible death cross.
IBB (Biotechnology The 200 WMA at 104.75-now resistance
XRT (Retail) Closed under 27.80 or the 200 DMA putting this into an unconfirmed Distribution phase
Every day you'll be prepared to trade with: