September 24, 2018
By Mish Schneider
Over the weekend and after a rough trip to the east coast due to major delays, we got out of the Uber car to be greeted by this buzzing hornet’s nest affixed to my sister’s house.
The exterminator came on a Sunday, yay, and sprayed those nasty bald-faced hornets into oblivion.
The nest though, illustrates architectual genius.
The outside is made from digested bits of wood, while the infertile females inside, create elaborate honeycombs.
Monday, the elaborate façade of the market, protecting the sweet honey that so many bulls have gathered, met with its own exterminator.
The headlines were all about another political shakeup. We see that as a factor, but not the factor.
Nevertheless, the market, basically immune to any death spray thus far, had some nest damage, but also created some honey.
Over the weekend, we talked about the US dollar, interest rates and commodity prices.
The point was to bring you awareness that the dollar, if it becomes more vulnerable, presents a couple of potential dilemmas.
One is rising inflation, which would force the Fed’s hand on rates.
The other is the trade wars and the possibility of the dollar losing its status as the world’s currency.
Meanwhile, the dollar (UUP) bounced from its support levels and closed near the very pivotal 25.00 price point.
The interest rates (TLTs) are most likely waiting for the Fed meeting mid-week. They did firm some, yet continue to hold what we consider HUGE support-or a do or die level-116.
Except for crude oil, Commodites remain relatively trendless as a result.
Remember, we need a real trend, and not just the current chop among the 3 factors of dollar, rate and demand for raw materials.
For instance, while emerging markets partied last week, today, they got hit pretty hard. Not quite extermination, but now, some damage on the façade.
Semiconductors brought the market’s honey. That in turn helped NASDAQ.
But, the market needs the Russell 2000 and Transportation on board. Tech and FANG helps, but have little do with the upcoming GDP.
The Russells (IWM) bounced off the 50 DMA, yet lag behind what the Dow and SPY did last week when both made new highs.
Transportation (IYT), still working a topping pattern, sold off, but did not deteriorate in phase.
Therefore, besides the pesticide that the dollar and rates can spray on the bulls, the market needs to see IWM and IYT hold up.
When an exterminator kills a nest, some hornets stick around for a couple of days unsure of what happened.
Unless we see new drones, even those hornets eventually die or fly off.
S&P 500 (SPY) 291.74 the old high now pivotal with 290.52 the fast- moving average support to hold
Russell 2000 (IWM) 170 now pivotal support with 169.12 the 50 DMA and we still want to see this clear 172. Then 173.
Dow (DIA) Could see this as a topping pattern confirmed with some volume. 265.93 pivotal
Nasdaq (QQQ) 181.50 should continue to hold now if good. 185.48, last swing high, point to clear
KRE (Regional Banks) Has to hold around 61.26-especially by the end of the week
SMH (Semiconductors) 106.38 to 108 trading range to break one way or another.
IYT (Transportation) 206.70-207.22 pivotal resistance area. If fails to hold, 203 next.
IBB (Biotechnology) 117.83 the 50 DMA now the pivotal 50 DMA support with 120 key resistance
XRT (Retail) Landed right on the 50 DMA which means if fails, the weekly MA comes up next or around 50.15
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