After a soaking rain, the desert landscape resembles a super saturated sponge. Eventually, the desert sunshine absorbs the moisture and the landscape returns to aridness. This extreme fluctuation from saturation to bone dry defines a desert climate. In a word: Volatile.

In the market, many instruments have become super saturated. Particularly, the Russell 2000 registers extreme overbought conditions on the daily Relative Strength Indicator.

Furthermore, the ETF (IWM) nears a top of a channel on the monthly chart at around $134.00.

Interestingly, the Regional Banks ETF (KRE) is not overbought on the daily RSI yet is overbought on the monthly one. Additionally, KRE has cleared the monthly channel, which sits at $50.00.

Yet another Modern Family member, Semiconductors resembles IWM. SMH is overbought on the daily, not on the monthly though and trading at the top of a channel.

Transportation, more in line with Regional Banks, sits above the monthly channel line. That puts a close above or below 159.40 by next week a reliable measure to assess next direction.

Here we have four Modern Family instruments saturated on one timeframe or another. We have monthly channels that we could say represent the sun. Breaking above or failing below any of those channels can lead to volatility and a return to arid conditions.

Since channels are drawn using parallel lines, does the parallel drawn between a saturated desert and a saturated market, uh-hum, hold water?

For those seeking validity on the significance of channels, I suggest you review my August 8th Daily on the TLT Monthly channel titled, “Close Encounters with a Channel of the Technical Kind.

Since posting that Daily, the TLTs or 20+ Year Treasury Bond ETF, has fallen in price from 142 to 120.50! I’m a true believer.

Bringing the analysis to the present and considering last night’s analysis on “a new but way smaller inverted head and shoulders forming on the monthly SPY chart,” we now have fantastically reliable information to guide us.

1. What happens at 134 in the Russell 2000 (IWM?) Can it get there? If it does will it fly through or fail?
2. What happens at 50.00 in KRE? The price trades over that level now. Will it hold? And if it fails, should we pay attention?
3. Where do Semiconductors go from here? Presently at the top of the channel, will SMH close below or above 71.72 by the close of day November 30th?
4. Not close to a top of a channel but sitting at monthly resistance using another TA tactic-Bollinger Bands-what happens here to Transportation? Will it hold or fail 159.40?
5. Looking at the S&P 500 (SPY), last night I wrote that “a move and monthly close under 198 would make the head and shoulders pattern null and void.” However, if SPY holds, the measured move takes SPY to approximately $253-255. Which is more likely to happen?

Speaking of saturation, I am taking a break for the Thanksgiving Feast. This is the last Daily for the week. The next one will be out over the coming weekend. Happy Thanksgiving to all! Safe travels!

S&P 500 (SPY) 218 support 220 pivotal

Russell 2000 (IWM) Could see a move to the top of a channel around 134 if holds 131.67

Dow (DIA) 188-189 is the top of a channel on the monthly chart-write this down since if cannot close above there by the end of November could be time to run

Nasdaq (QQQ) 118 now pivotal support 119.75 resistance

KRE (Regional Banks) Impressive Prodigal

SMH (Semiconductors) 70.50 pivotal support

IYT (Transportation) Important this month-a close above or below 159.40

IBB (Biotechnology) 280 support held 290 pivotal and 300 big time resistance

XRT (Retail) New 2016 high. 46.00 pivotal

IYR (Real Estate) Moved up today working that reversal pattern

GLD (Gold Trust) 110 a reasonable target however, through 116 could see some buyers

GDX (Gold Miners) Unless this breaks 20.05, I’m watching for a bottom here

USO (US Oil Fund) 10.50 held! Through 10.80 sounds like a trade

TAN (Solar Energy) I admit an obsession with solar-so with that in mind, I am watching to see if confirms a double bottom

TLT (iShares 20+ Year Treasuries) 120.15 point to hold

UUP (Dollar Bull) 26.25 resistance-25.80 support