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Is the Bull Market Heading for Extinction?

June 13, 2016

Mish's Daily

By Mish Schneider

Is the Bull Market Nearly Extinct?

Dinosaur Museum Blanding, Utah

The Allosaurus Dinosaur roamed Colorado about 150 million years ago. As a carnivore, it was considered the top of the food chain. Paleontologists believe it had cooperative social behavior, hunting in packs.

A Rallysaurus, in honor of the “long in the tooth” rally the market has enjoyed, roams the US since 2010. Our Rallysaurus, also at the top of the food chain, has hunted in packs feasting mainly on BEARS for years.

Dinosaurs vanished off the face of the earth about 65 million years ago during a mass extinction. Many believe it was because of a meteor that plunged into earth. Recent analysis by scientists suggest that by the time the dinosaurs disappeared completely, they had already slowed down markedly.

The Rallysaurus slowed down markedly at the beginning of 2016. Nevertheless, with many but certainly not all continuing to enjoy top of the food chain status, the Rallysaurus still lives.

With the Dow trading at 17,733 while the Volatility (fear) Index rocketed nearly 15% today, we wonder if a meteor is heading our way? If so, will it cause extinction once and for all for the Rallysaurus?

We have one advantage that the dinosaurs lacked: our brains are big enough to plan ahead and prepare for worst-case contingencies. So, let’s not worry about the extinction of our Modern Family . The market might be due for a major correction, but that does not mean the end of days.

The Russell 2000 is nearing support levels. With the Bullish phase intact, 110.75 up to 112.50 is the key area to hold. If it can make its way back over 116.50, that would look a lot more positive.

Retail and Biotechnology, weakest among the family all along, look like they may already be on the path to starvation. Yet, never underestimate those large brains. Food sources may turn up. First, IBB has to get back over 272 and XRT must reclaim 42.00.

Today’s performance in Transportation failing the 200 DMA does not instill confidence. However, a move over 40.00 would renew it.

By far the strongest member of the family is Semiconductors. The Tyrannosaurus so to speak, SMH barely declined from last week’s highs. A rally-saurus over today’s highs, or the 57.10-20 area, and Semis can considerably help move the rest of the herd. Otherwise, 54.50 is her next stop.

If Semi’s falter, watch Regional Banks. KRE sits right above a trend line from the 2016 lows. A break and close beneath 39.75 and I will be looking up for that meteor.

S&P 500 (SPY) 207.70 is the 50 DMA and support. Then, it could test weekly support levels at 202.50. Over 211, way better

Russell 2000 (IWM) 112.50 level important. 115 pivotal and over 116.50 impressive

Dow (DIA) Unconfirmed warning phase which means it needs a second close under 177.75 to confirm.

Nasdaq (QQQ) 107.50-107.75 support on 2 timeframes. If holds, now that it entered an unconfirmed warning phase, would have to close back over 108.40 to look better again

Volatility Index (VIX) Last week this and the market closed green after making new multiyear lows. Not only does this exemplify how contrarian sentiment can be, but also how love turns to fear very quickly. Unconfirmed recovery phase.

XLF (Financials) 22.96 the 200 DMA.

KRE (Regional Banks) See above

SMH (Semiconductors) See above

IYT (Transportation) 137.20 the June 3^rd low. 138.60 pivotal with this back in a recovery from a bull phase

IBB (Biotechnology) 260 support with 272.50 resistance

XRT (Retail) Already in a bear phase, Granny has 40 to defend.

ITB (US Home Construction) If holds 26.55 area then still has a shot

GLD (Gold Trust) 120.50 support with next big resistance at 126

SLV (Silver) 15.75 support with overhead at 17.00 then 19.00

GDX (Gold Miners) 25.55 support level to hold.

USO (US Oil Fund) Held near support. 12.00 resistance.

UNG (US NatGas Fund) 7.40 a good point to use for a stop.