August 7, 2019
By Geoff Bysshe
Three years ago, in June of 2016, the TLT broke out of a consolidation pattern around 132 and ran up to make the all-time high at just over 143.
Last week, TLT broke out of a consolidation pattern around 132 and today, it topped out at 143.
There is one big difference in the nearly identical point gains from the same initial level, in 2016 the move took a month, but this time it only took 5 days!
I went looking for the last time the TLT moved 6% or more in 5 days. It’s been a while.
A move of this speed and size hasn’t happened since June of 2012!
The June 2012 high was followed by a month-long correction before it was later exceeded.
However, the subsequent high in July did not follow through, and it created a double top that began a roughly 25% decline that lasted 18 months.
I’m not predicting that a long-term top in TLT was set today, but it seems likely that it’s melt-up should pause for a while.
So what does this mean for stocks?
The media will focus on the big ugly percentage declines in the indexes in the morning that recovered.
However, only the DIA broke Monday’s low, and not by much.
So while the volatility was high, it turned out to be a ‘consolidation’ day on the charts.
There is one exception, QQQ. It closed over its prior 2-day range.
Yesterday, I suggested that for as long as the market’s consolidate the ‘range’ will guide the markets next move.
The bullish case for stocks is that the QQQ may have just begun to bounce, and SMH is back in a bullish phase.
The bearish case is that if the indexes breakdown of their ranges that are now 3-days in the making, that’s a lot of fuel for the next move down.
Until we get the range breakouts, the volatility is just noise.
S&P 500 (SPY) Support at the swing low, 281.72. Big support area is 280 to 277.70 (the 200 DMA). Resistance at 288.82 and gap fill at 290.90.
Russell 2000 (IWM) Support at the swing low, 146.21. Next big support is 145.30. Resistance at 150 and gap fill at 151.28 which is also near the 2000 DMA
Dow (DIA) Made a new swing low today. Support at the swing low, 254.36. Next support levels are 252.50 and 247. Resistance at 261.15 and gap fill at 262.43.
Nasdaq (QQQ) Closed over prior 2-day range. Swing low is at a trendline from the December 2018 low. Support at Tuesday’s low, 181.07, the swing low, 179.20. Big support is the 200 DMA at 175.65.
KRE (Regional Banks) Traded under 50, but closed over it. Support at swing low, 49.40 and 49.00. Big resistance at 52, then at 50 DMA, 52.80.
SMH (Semiconductors) Closed at 110.61 (well over 110). Look for it to lead if market rallies. 200 DMA is 102.40. Gap fills at 114.46.
IYT (Transportation) Support at 179.20. Next big support is 175. Big Resistance at 185 (200 DMA).
IBB (Biotechnology) 101 is big support. 104 has been pivotal since April. Big resistance around105.
XRT (Retail) Support area at 40.30-40.00 Major resistance around 42.
Bye for now,
Geoff is filling in for Mish until August 24th.