September 11, 2018
By Mish Schneider
Yes, it is as complicated as the photo depicts.
This bull does not take offerings lightly.
Whilst investors hold out their hands to feed the bull, the bull’s crown serves as a cautionary tale.
If we go with each of the crown’s skeleton heads as five cautionary themes, the first one is certainly Semiconductors (SMH.)
As the four indices closed green, SMH closed red and back into a Warning Phase.
The second skeleton cautions buyers with the resistance levels or the fast-moving average in each of the indices.
Great to see some green out of NASDAQ (QQQ).
However, at this point, it looks more like a bounce off the 50 daily moving average support.
QQQ has yet to clear the overhead fast-moving average, now sloping down.
Same is true for the Russell’s, S&P 500 and the Dow.
Does the market need Semiconductors before it can move up further?
Furthermore, with 2 palpable skeletons on the bull’s crown, what do the other 3 represent?
The 3rd skeleton is the rising interest rates and firming dollar.
The 20+ Year Treasuries or TLTs, are sitting at a critical area. On the weekly chart, 116 has been a rock of support.
Should that level break, we are looking at a monster head and shoulders top that could bring TLTs down to 100. That means of course, borrowing and American goods cost more. That will impact the market.
Secondly, the dollar’s rise has a similar impact, not to mention the pressure it puts on commodity prices.
The 4th skeleton head is crude oil.
With many commodities declining in price, oil is rising. While that may be good for parts of the US that count on oil revenue, it’s not good for consumers. Rising dollar, rising rates and rising oil prices-a sardonic trifecta.
The 5th skeleton head represents emerging markets. If we look at EEM, it made a new 2018 low today. Regardless of hype, we are a global economy. Should EEM continue to fall, that means so does global demand. And yes, even for American goods.
Nevertheless, the bull remains the deity. And investors continue to feed the seemingly immortal bull.
However, watch those skeletons.
If they stay in proportion to the size of the bull’s head, we are not as concerned. Yet, if they begin to grow heavier atop the bull’s head, the bull could bite the hand that feeds it.
S&P 500 (SPY) 286.50 support to hold (or we will see 283 next) with a move back over 289.50 better (got to 289.55). I’d like to see this move up above the fast MA as this rally is still pretty shallow.
Russell 2000 (IWM) 170 big support to hold, which did to the tick. Now, if has anything, it must clear/close over 172.
Dow (DIA) 259-260-a clear or break will be telling
Nasdaq (QQQ) 184.15 is that fast moving average it must clear to keep going. Otherwise, if fails 180 not so healthy
KRE (Regional Banks) Like to see this continue to hold 62.45 and clear 64.00
SMH (Semiconductors) Unconfirmed warning phase. Under 105.50 trouble, unless this can open and hold back over 106.
IYT (Transportation) New all-time high today. That makes 206.90 the old high pivotal support. Some caution now as this made a new high by only one tick. Under 207.22 could see some selling
IBB (Biotechnology) 115-116 next area of support and 120 now becomes the pivotal resistance
XRT (Retail) 50.44 is the 50 DMA. Good mover today-back over 52.00. If holds looking at 56 area next resistance
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