Market Analysis for Trading on 2/5/2015

Mish Schneider | February 4, 2015

“You put your right foot in, you put your right foot out; you do the hokey pokey and turn yourself around; that’s not what it’s all about”

My 3 tells, patience and a systematic approach to trading help so much in preventing us from doing the hokey pokey (except at children’s parties.)

The Russell 2000 (even though I have renamed it Sybil 2000) reliably indicates whether one should be long, short or neutral. Take this week thus far. On Monday, it valiantly held theJanuary Calendar Range Low. Tuesday, it rallied and changed back to a bullish phase. Wednesday, it digested the week at the middle of the January Calendar Trading Range closing with a doji day (opening and closing prices are practically the same.)

The “tell” then is neutral to slightly positive, bullish over the January high and bearish under the January low.

Secondly, Interest Rates or Long Bonds help determine how much flight to safety or confidence the market has on any given day but also over time. Monday, TLTs broke from the highs while the market was weak therefore confirmed that safety plays were abating yet not with that much conviction. Tuesday, TLTs gapped lower-confidence returned to the market. Wednesday, they began weak then came back considerably from the lows to close higher. The ‘tell” therefore, is market not as happy and worry exists. Nobody wants to see rates rise too fast; rather, just enough to interpret firmer as buoyancy in the US Economy and equally, nobody really wants to see rates much lower (fear).

Thirdly, oil (which is really code for deflation fears), indicates exactly that-fear about economies dependent on oil, which in turn keeps rates low, which in turn becomes perceived as a flight to safety. Monday, USO gapped higher and closed well. That helped rescue the market. Tuesday it flew higher thereby exuberance prevailed. Wednesday, it sold off hard, the market chopped around. Yet, USO held the gap low from Monday so, whew, maybe not so bad after all.

I even added a fourth tell this week-Financials (XLF). Over 23.75 that keeps one more on the confident side for now. Over the 50 DMA, if it can get there, way better. End of the day on Wednesday, with news of the ECB tightening collateral rules for Greek debt, XLF closed under 23.75 marginally.

Tally those “tells” up and you’ll soon replace “shake it all around” with a much smootherWaltz.

S&P 500 (SPY) Unconfirmed Warning Phase 204.44 the 50 DMA to hold 203.05 a good support point then 201.15 Subscribers: Positive pivots in all

Russell 2000 (IWM) Confirmed Bullish Phase should hold 117.45 the 50 DMA with the January high 120.56

Dow (DIA) Unconfirmed Bullish Phase if holds the 50 DMA at 176.44. Support then 174.65

Nasdaq (QQQ) Warning Phase unless it clears/holds 103.18 the 50 DMA. 102.50 support then 101.05

XLF (Financials) 23.55 support that should hold if good. The, 23.77 pivotal

KRE (Regional Banks) Inside day with noise until it clears 39.00

SMH (Semiconductors) Has a reversal pattern but really needs to clear 54.43

IBB (Biotechnology) Hanging onto the 50 DMA-don’t want to see this collapse but doesn’t necessarily need to lead either

XRT (Retail) Bullish phase and have to see it clear 96.00

ITB (US Home Construction) Held 26.16 which has to continue to hold

GLD (Gold Trust) Doji day here too-still over the 200 DMA so worth watching.

GDX (Gold Miners) Over 22.70 could be start of a good move higher

USO (US Oil Fund) Held 17.93 so that’s the number and over 19.20 new ballgame

XLE (Energy) confirmed recovery phase

XOP (Oil and Gas Exploration) Probably like this best in the oil and gas groups

TAN (Guggenheim Solar Energy) Quadruple bottoms since last October

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Another Big volume day with a sell off then rally. Tricky

UUP (Dollar Bull) 24.70 support

EWG (Germany) Cleared the 200 DMA

FXI (China Large Cap Fund) Now, over 44.00 looks hot

CORN (Corn) Subscribers: Inside day and worth watching

BAL (Cotton) Subscribers: Also worth watching