I suspect most of you have never looked up to see a throng of vampire bats overhead. Please imagine if you will, what emotions that sight might evoke. Terror? Awe? Both?

Now substitute bats flying overhead with the image of market charts flying overhead. What do you see? Terror? Awe? Both?

Probably both. Terror in that the indices and Modern Family members are headed every which way creating a sense of chaos and loss of control.

Awe in that this phenomenon is not something we traders see every day. Fascinating really, when you have Regional Banks on new 2016 highs and Retail on 3-month lows.

NASDAQ, depending upon whether it follows Google up or Amazon down sits in a bullish phase although well below key resistance at 119.00. After hours, QQQs took Amazon’s lead south.

The Dow, not exactly a screamer at least holds considerably above 18,000.

The Russell 2000, not surprisingly, fell further in sympathy with the Retail sector. Trannies are up. Biotechnology put on an oxygen mask to keep it above the key weekly moving average. Semiconductors are gliding, yet not gaining the necessary additional traction it needs to remain at these levels.

Terror and Awe-The market action are like outer space. Are they places of wonder and exploration or places of horror?

Last night we looked at the soft commodities markets shrugging off higher yields and a stronger dollar. Today, Cotton, Corn, Wheat, Soybeans, Coffee, and Livestock closed green.

Gold gained to close basically on the 200 DMA whereas the gold miners closed red and just below the 200 DMA. Oil rose although with an inside trading day (traded within the range of the day before.)

On July 29th, I referenced the idea of stagflation. That’s when the economy is in a recession while experiencing serious inflation.

At that point, the thought came to me as I mused about the Federal Reserve going the way of negative rates. Clearly, the buzz has been about the Fed’s intentions to do the opposite and raise.

However, what if with Retail and consumer confidence weak while commodities get stronger the Fed is faced with stagflation?

In the 1970’s the Fed got it wrong. They increased the money supply to promote growth figuring that concerns about inflation took a backseat. The result was inflation out of control.

One significant difference between the 70’s and now is oil. The oil then was high in price. Today, the opposite is true.

Regardless, the Fed has a tough choice to make. Lower rates and live with the possibility of high inflation or raise them and risk an economic recession.

Talk about Terror and Awe!

In the end, both scenarios the market and outer space are the same. The horror of trading the market is the wonder of trading the market.

S&P 500 (SPY): 214 pivotal 216 resistance 212 support

Russell 2000 (IWM) 120 pivotal with next support 117 area

Dow (DIA) 180 do or die support area and 182.50 resistance to clear

Nasdaq (QQQ) 117.50 area the 50 DMA broke after hours. Now pivotal. Next support 116 then 114.50. Needs to get back over 119.

KRE (Regional Banks) Closed at 44 making this a super pivotal area. Above good below defensive

SMH (Semiconductors 68.00 pivotal with 67 the 50 DMA support

IYT (Transportation) 143.25 the 50 DMA support and a move above 144.70 better

IBB (Biotechnology) 265 key weekly moving average

XRT (Retail) 40.00 area the underlying support. A miracle would be a move back over 43.00

GLD (Gold Trust) Confirmed Distribution Phase with some support at 120.50. Eyes here

GDX (Gold Miners) 23.70 pivotal

USO (US Oil Fund). 11.50 pivotal. 10.80 major support

TAN (Guggenheim Solar Energy) Got close to 19.50-if market fails so will this. Otherwise, good spot to hold

TLT (iShares 20+ Year Treasuries) I sense some dovish FED comments on the horizon making 130 a good support level

UUP (Dollar Bull) Looks strong but anything can happen