Reading · The Market House

Mish back in the Market House! It’s been too long since we caught up with the wonderful Michele 'Mish' Schneider, Chief Strategist at MarketGauge.com.

Let’s get right into it…

Mish is looking at the current situation through three different lenses.

Mish has been using her Economic Modern Family as a way to judge the health of the US economy for 10 years (and now has an educational YouTube channel on it - subscribe and share with your kids!)

Each "family member" is an ETF representing a key sector of the economy, whose performance tells a story that helps gauge overall market health: IWM (Russell 2000), XRT (Retail), KRE (regional banks), IYT (Transportation), IBB (Biotech), and SMH (Semis).

❗“Except for semis, they’re all in bullish phases on their weekly charts and all of them are near all time highs,” Mish said. “There’s still this sort of separation of what’s happening ‘over there,’ and the US economy still being in better shape than most other countries, and that exceptionalism we’re still experiencing.”

Mish is focused on the longer-term effects of sustained higher oil and food prices. “Even though inflation numbers have come down, it’s been very nuanced and pocketed,” she said. “The things we need the most are still very expensive. What is that going to do in our expanding K-shaped economy? And can it actually lead to a recession?”

“We’re having tremendous volatility in the commodities market,” Mish said.

What that means for Mish now is that:

“You just have to alter how you trade commodities versus how you’re trading stocks. You absolutely have to look at buying weakness right now, because nothing has fundamentally changed. If anything, we have a situation where things, particularly with food prices, could get worse.”

On oil specifically, Mish pointed out that the chart itself “supports buy the dip, sell the rally, because we have a potential inverted head and shoulders in the oil futures chart. If you think about it as a $75-$95 range, buy it closer down to the dip - that’s support - and sell it closer to the rally, until one day we see something escalate.”
On gold, Mish “got bullish a couple of weeks ago” after getting out at the highs. Her reasons for getting back into the trade are fundamental: uncertainty and volatility around mid-term elections, the debt ceiling conversation, another potential government shutdown, etc. $4,040 is Mish’s new level of support and she thinks “if we can get back up to $4,125 and definitely $4,200, maybe we’re going to start to see some of the narrative change, it will certainly be a good sign for gold… I’m looking to make this one of my biggest positions as we go into the second half of the year.”
The copper story looks different though: “To me, it just looks sideways and uninteresting,” Mish said. “And I think that’s a perfect reflection of how people are thinking, ‘well, is the economy going to grow? is it going to contract? Are oil futures going to be a problem for us longer term, or does it really not matter? Is the Fed going to be hawkish, or isn’t?’” For Mish, copper is telling you, “we don’t know the answer. Right now, Dr. Copper is probably looking for a diagnosis and not necessarily ready to find one yet.”
Mish, like Dale, was on top of the ags trade with DBA long before it was being talked about more widely. Now, she says: “If you look at ags in general - including soybeans, corn, and wheat - I think they get very volatile here, but I think they’ve already formed a base,” Mish said. “They’re testing that higher level of support, and we’ll continue to do that until there’s a reason for them to go higher. It could be El Nino, it could be Ukraine, it cold be the hurricane season coming up… All I know is, I’m not bearish.”

“What I’m starting to see in staples, utilities, commodities, is a new range based on what we saw in the beginning of the year, versus the big dump we had in May and June,” she said. “And now there is a lot of support and ranging that could easily break out and take us into new high territory in sectors that are different than what we’re used to.”

“The dollar is still very strong, even with all the talk about petrodollars and foreign countries not buying our dollar,” she said. “And unless DXY breaks down under 100, I would say the dollar doesn’t look like it’s in any great threat in terms of its world reserve currency status.”

Mish keeps an eye on TLT, and noted that it bounced up yesterday (Monday) after selling off last week. If yields drop further, she thinks it’s partly because the US is “buying back its own bonds at record rates,” and on an investor level, “maybe we need bonds as a safety play.”

Mish loves day trading right now “because you can wake up and find something, it goes up 10%, and then the next day it’s down 15%.” And SpaceX is one of those somethings - she bought it last week for a day trade. She thought it might have found fair value and bottomed at $113, “so I bought it at $113 and then I got out of some of it and just put on a no loss stop.” (When it comes to day-trading, worth remembering Mish has been trading for decades.)

P.S. If you’re involved in the financial literacy space (or know someone who is), DM Michele 'Mish' Schneider here on Substack. And if you’re not following the ‘Trades of Our Lives’ series on YouTube, right this way.

Thanks to everyone who tuned in live…! We’ll be back tomorrow at 4pm ET for Fed Day with Dale.

Mish Schneider: "You Have to Look at Buying Weakness in the Commodities Market Right Now"

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