January 12, 2020
By Mish Schneider
A major wildfire in the Capitan Mountains brought firefighters to the scene.
As the crew battled to contain the blaze, they received a report of a lone bear cub seen wandering near the fire line.
A forest ranger found the poor little dude in a tree, charred and burned.
He drove the cub to Santa Fe, where he was treated for massive burns. After he healed, he was sent to a zoo, where he lived until his death in 1976.
Hence, the popular anthem Smokey the Bear was born.
What does this have to do with the photo and the market?
The beak represents the decay of the bears these last few months.
As far as the market, with all indices closing red on Friday, will the decaying bears reignite?
The overall picture of the 6 members of the Modern Family does not look bad. In fact, one could say that the red close Friday in all 6 members is nothing more than a healthy correction.
So with that in mind, starting with the top left, Semiconductors SMH, after a doji week last week, this week we have a bearish engulfing pattern.
In English, that means that after squeaking out a new all-time high, SMH closed in the lower end of the trading range for the week. A move under 139.77-this week’s low-should be duly noted as possible exhaustion.
Top middle is Transportation IYT. Another weekly bearish candlestick, the 200 level continues to elude our very important sector. However, IYT made up some necessary ground this week. Now, it should hold 195 or we will be back looking at 190.
Far right top row is the Russell 2000 IWM. Looking more like a gentle correction than a top, need I remind you that it continues to lag way behind the S&P 500.
Bottom left is Retail XRT. News of Macy’s, Pier One closing stores along with Bed Bath and Beyond’s earnings woes, brick and mortar is our weakest link. Until XRT can make a stand over 46.00, we look at this as the slowing economy broadcast.
Middle bottom is Biotechnology IBB. The weekly chart shows a classic middle finger formation. Unless it clears 122, that could mean lower levels. Furthermore, it could signal the coming end of the market euphoria.
Finally we have Regional Banks KRE. Next week starts bank earnings season. KRE’s weekly charts also looks more like a correction than a top. However, on the daily chart KRE sits right on the 50-DMA and is flirting with an unconfirmed caution phase. A move under 55.95 should yield more selling.
As equities have gotten hot enough to start a forest fire, with this correction, we may have smoked out the bears from hibernation. Nevertheless, bears ought to take heed so they do not get burned again.
And bulls, also take heed as the jobs report indicates what I believe is coming- a slowing economy and rising inflation.
In case you missed it -- Here is a link to my RealVision segment from January 7th.
Russell 2000 (IWM) Failed the 10-DMA and must hold 163.70 support or we are looking at 161.90
Dow (DIA) The makings of a reversal pattern and bearish engulfing one as well. 286.88 support to hold.
Nasdaq (QQQ) The makings of a reversal pattern and bearish engulfing one as well. 215.44 pivotal support
KRE (Regional Banks) Sitting right on the 50-DMA-a must watch Monday
SMH (Semiconductors) Possible reversal pattern with support right at Friday’s low that must hold by the close to avoid more selling
IYT (Transportation) 195 pivotal area. 200 key resistance.
IBB (Biotechnology) 121.91 resistance and 115.50 support
XRT (Retail) 45.41-46.00 pivotal resistance. 44.78 the 50-DMA