A Market With Purple Gratitude In Advance Of Rain
We drove up to this dead-end and these road signs. I thought of the Scarecrow in the Wizard of Oz. While nailed to a post, he instructed Dorothy that some people like to go both ways.
The haphazardly strung “Thank You God for the Rain” sign intrigued me as well.
We live in a desert where rain falls infrequently. Someone recycled the sign. Whatever merited 2 yellow exclamation points prior, got replaced with purple gratitude in advance of rain.
Put the 2 thoughts together, and you have a dead-end with a choice of which way to turn coupled with a sign of gratitude for the nourishment you have yet to receive.
That sums up how I feel about the market at this moment in time.
If just landing on the yellow brick road, should you turn south towards Kansas or north towards Oz?
Moreover, once you decide which way to turn, how grateful can you be given the uncertainty of the outcome?
To restate less esoterically, the challenge ahead rests with rooting for more upside on the basis of perception over reality.
The flip side, I find it equally vexing to root for a correction. Will a correction present with a buy opportunity or will it mean all the uncertainty comes home to roost?
Commodities, particularly oil, softs and agricultures took a beating. All while the US dollar softened and the interest rate yields fell. Like the juxtaposition of the signs, which way do we turn and why be grateful for something that hasn’t happened yet?
Tomorrow is the last day of November. I look once again to the monthly chart channels featured over the last several trading days.
First, the TLT (20+ Year Long Treasury Bonds) rallied some more off that clean floor or the price level of the bottom of the channel that sits around 118.55-119.
December is the month of the supposed rate hike by the Federal Reserve. We neither know which direction they will turn nor how grateful we should be regardless.
The Russell 2000’s (IWM) channel top resides at 134. A close above will take Bulls further towards Oz. A close below and revelers could run into goblins.
Transportation’s (IYT) big swing area sits at the 160 level. Trans, as of today, sits well above that point.
Seems Regional Banks indicate no fear. While Semiconductors (SMH), with the channel top near November highs of 71.83, could play out as a wild card.
On the weaker side, Granny Retail (XRT), will look vulnerable if it cannot hold above 45.50. Biotechnology (IBB), if it can clear over 285 will juice new speculators. Yet, if 285 clears, will that make it rain?
I’m standing by the dead-end of the Yellow Brick Road. There’s a wicked witch out there. If it rains and she gets wet, she will melt. If not, beware of flying monkeys!
After all, we are still in the 2016 Chinese Year of the Monkey.
S&P 500 (SPY) 221.50 pivotal 219.75 support
Russell 2000 (IWM) Top of a channel 134. 131.70 the fast-moving average which if fails, a correction to 126 not out of the question.
Dow (DIA) 190.50 super pivotal area and a good place to gauge next move depending upon where November closes.
Nasdaq (QQQ) 118 now pivotal support 119.75 resistance
KRE (Regional Banks) Inside day. 50.00 major support.
SMH (Semiconductors) 70.30 pivotal support with 71.75 channel resistance
IYT (Transportation) Important this month-a close above or below 160.00
IBB (Biotechnology) 278.50 area the 50 DMA to hold or trouble
XRT (Retail) 45.50 the monthly support to defend
IYR (Real Estate) If interest rates ease more, could see move to 76.85.
GLD (Gold Trust) As long as this holds 112.35, a reversal in the works.
GDX (Gold Miners) Inside day. Still like the potential bottoming pattern
USO (US Oil Fund) 10.80-10.00 range to break. Held 10.00 today
TLT (iShares 20+ Year Treasuries) 123.15 resistance with 121.65 support
UUP (Dollar Bull) Reversal pattern-could see another move down to 25 if cannot clear 26.25
Disclosure: None.