For consistency, here are the key go-tos during an uncertain time in the market:
The next direction of long bonds (TLT).
The next direction of the small caps and retail sectors (IWM, XRT).
The next direction of commodities, all of them, but particularly the agricultural ones, oil and precious metals (DBA, DBC).
There are other relationships to watch, like our risk gauges (all still risk-on). And, of course, there are stocks that will outperform, like what we saw on Monday in defense companies (PLTR). Overall, though, and to simplify the macro, these top 3 points should help a lot.
The first chart is the monthly charts of small caps and retail (IWM and XRT). The 80-month moving average (green line) is a longer-term business cycle or about 6-7 years. Besides the blip during COVID, IWM has not broken that 80-month MA since 2010. XRT sits right above the 80-month. To remain bullish, those lines must continue to hold.
We have seen lots of mean reversions and reversal looking bottoms in TLT. They have been fake outs. What we do not want to see is TLT outperform SPY (Leadership indicator remains risk on as long as SPY outperforms). Furthermore, we can see TLT rally along with SPY if SPY continues to outperform.
The best signal for watching a TLT rally is the 10-DMA or cyan line. TLT has not been above that since September 1st.
A strong rally in TLT where SPY begins to underperform could signal risk-off. Moreover, it could negatively impact equities as fears of recession or hyperinflation kick in.
In the commodities world, DBA and DBC offer a good way to assess the spectrum of raw materials and inflation. We like this, as commodities are a big focus during wars and geopolitical stress.
Also this week, we will see PPI and CPI numbers come out. While oil, gold, precious metals and miners were up today along with some soft commodities (sugar, coffee), grains were red.
Looking at DBA (on the left), it is underperforming SPY and in a caution phase trading under the 50-DMA (blue). Could DBA rally? Sure. Over 21.80, we would begin to think more bullish in agriculturals. DBC (on the right), more oil- and precious metals-focused, is also underperforming the SPY. That is surprising and supports a risk-on environment. Through 24.75 that picture changes.
Should oil and PMs start to outperform the SPY, then the inflation conversation begins to dominate. Hence, right now, risk-on prevails.
Commodities strengthened after they became oversold. But they remain weaker than the SPY. And long bonds are also experiencing buying — but it’s too soon to know if yields have topped. And if they have, is it for the right reasons?
This is for educational purposes only. Trading comes with risk.
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Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.
Mish in the Media
Mish takes over as guest host for David Keller, CMT on the Monday, October 9 edition of StockCharts TV’s The Final Bar, where she shares her thoughts in the daily Market Recap during a day of uncertain news.
To quote Al Mendez, “The smartest woman in Business Analysis @marketminute [Mish] impresses Charles with her “deep dive” to interpret the present Market direction.” See Mish’s appearance on Fox Business’ Making Money with Charles Payne here!
Mish covers bonds, small caps, transports and commodities-dues for the next moves in this video from Yahoo! Finance.
In this video from Real Vision, Mish joins Maggie Lake to share what her framework suggests about junk bonds and investment-grade bonds, what she’s watching in commodity markets, and how to structure a portfolio to navigate both bull and bear markets.
Mish was interviewed by Kitco News for the article “This Could Be the Last Gasp of the Bond Market Selloff, Which Will be Bullish for Gold Prices”, available to read here.
Mish presents a warning in this appearance on BNN Bloomberg’s Opening Bell — before loading up seasonality trades or growth stocks, watch the “inside” sectors of the US economy.
Watch Mish and Nicole Petallides discuss how pros and cons working in tandem, plus why commodities are still a thing, in this video from Schwab.
Mish talks TSLA in this video from Business First AM.
See Mish argue investors could jump into mega-tech over value and explain why she is keeping an eye on WTI prices on BNN Bloomberg’s Opening Bell.
Even as markets crumble, there are yet market opportunities to be found, as Mish discusses on Business First AM here.
Mish explains how she’s preparing for the next move in Equities and Commodities in this video with Benzinga’s team.
Mish shares why the most important ETFs to watch are Retailers (XRT) and Small Caps (IWM) in this appearance on the Thursday, September 20 edition of StockCharts TV’s The Final Bar with David Keller, and also explains MarketGauge’s latest plugin on the StockCharts ACP platform. Mish’s interview begins at 19:53.
Mish talks Coinbase in this video from Business First AM!
Mish looks at some sectors from the economic family, oil, and risk in this appearance on Yahoo Finance!
As the stock market tries to shake off a slow summer, Mish joins Investing with IBD to explain how she avoids analysis paralysis using the six market phases and the economic modern family. This edition of the podcast takes a look at the warnings, the pockets of strength, and how to see the bigger picture.
Coming Up:
October 12: Dale Pinkert, F.A.C.E.
October 26: Schwab and Yahoo! Finance at the NYSE
October 27: Live in-studio with Charles Payne, Fox Business
October 29-31: The Money Show
Weekly: Business First AM, CMC Markets
ETF Summary
S&P 500 (SPY): 435 resistance.
Russell 2000 (IWM): 177 resistance.
Dow (DIA): 338 resistance.
Nasdaq (QQQ): 368 resistance.
Regional Banks (KRE): 39.80-42.00 range.
Semiconductors (SMH): 150 resistance, 143 support.
Transportation (IYT): 237 resistance, 225 support.
Biotechnology (IBB): 120-125 range.
Retail (XRT): 57 key support; if can climb over 61, get bullish.
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
