Mish’s Daily: When the Trend is Not Your Friend — A Trading Plan

Currently, if we look at the S&P 500 and the Retail Sector through XRT, our foregone conclusion is that, for the most part, equities are a huge distraction. The obvious trend is down, but is it that obvious at current levels?

Looking at the SPY chart, we could be setting up for a mean reversion trade (bear market bounce that take SPY back to 380.) So, selling right now? Maybe, but SPY has to break 360. And Granny Retail (XRT), also in a downtrend, has some good bottoming action, is outperforming the SPY and the momentum on the Real Motion indicator is holding up.

That makes it fairly simple. XRT holds here and clears back over the 200-week moving average and 62.50 level to rally more bringing the SPY up along with it. Or, SPY fails 360 and drags XRT down further, potentially breaking harder below the 200-WMA or close to 50.00.

So if it is that simple, why do we think equities are more of a distraction right now?

Trends are supposed to be your friend. But right now, the trend feels a bit treacherous for both the bears and the bulls. Biotechnology (IBB), the first to bottom in 2009 after the mortgage crisis, has been in a strong downtrend and is well under the 200-WMA. However, IBB also is outperforming the SPY and showing some balance in momentum. Can it hold up if SPY fails 260? Doubtful.

So, what do we like right now? China, Commodities and Cannabis.

We are all about opportunity with the best risk. China (FXI) is in a position in our portfolio that is looking like an add. As the U.S. does QT, China is doing QE.

Commodities (CRB) has been in an uptrend and is correcting into support. With the worst global inflation rates in 40 years and stagflation on the horizon, we will continue to add to our tactical positions in commodities.

Cannabis (MSOS), which we are aside in right now, continues to intrigue us. If equities rise, so will that sector. And if equities fall, the momentum indicates that the selling there has pretty much dried up.

Our portfolios remain in the black and, for those individuals underwater, stay tuned for more ways to inflation-proof your portfolio and mitigate inflation. We see attractive sectors and are waiting for the right time to execute.

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 presented the “Quick and Dirty on Inflation” on BizFirst AM.

Mish made a guest appearance on Fox Business with Neil Cavuto!

Read Mish’s new article on inflation for CMC Markets here!

Mish was a guest on the Tuesday, June 14th edition of StockCharts TV’s The Final Bar with David Keller, where she talks looking for a bounce from the Retail ETF (XRT) and downside targets for Bitcoin.

Mish appeared on “Chart School” with Charles Payne on Fox Business:

Watch Mish cover her Economic Family on the Money Show!

Mish sit downs with Jared Blikre to discuss her history, investing and the future in this video from Yahoo Finance!

ETF Summary

S&P 500 (SPY): 380 resistance, 374 pivotal support, 360 major support.Russell 2000 (IWM): 159 support, 175-177 big resistance.Dow (DIA): 294 support.Nasdaq (QQQ): 290 resistance 263 big support.KRE (Regional Banks): 56 the 200-WMA, 60 resistance.SMH (Semiconductors): 195 some minor support with 220 resistance.IYT (Transportation): 211.87 the 200-WMA resistance, 192 support.IBB (Biotechnology): Still potential double bottom110 pivotal-112.50 resistance.XRT (Retail): 60.62 the important 200-WMA support closed just below-a gap up Tuesday would look compelling for a rally.

Mish Schneider


Director of Trading Research and Education