Mish's Market Minute

Island Bottom, Momentum and Buffett


Rare to see an island bottom. However, the one in UNG, the ETF for natural gas, had a classic one. After making new all-time lows, an island confirmation suggests a reversal of the downtrend.

But that's not all. Warren Buffett bought Dominion Energy (D), a company that heats and cools 7.5 million customers (small) in 18 states with electricity and natural gas. For Buffett, this is a value play. For me, after seeing the UNG chart, I like to think of it as also a commodities play.

Why else is this island bottom so compelling?

The other two indicators on the chart are MarketGauge Proprietary indicators. The middle one is a price performance comparison to a key benchmark. UNG has begun to outperform that benchmark.

The bottom chart shows our Real Motion indicator - and that's where things get really interesting. The momentum shows price well above the 50-DMA, while the actual price trades just below the 50-DMA. This type of divergence is compelling and worth watching to see if price can catch up to momentum.

Island bottom, momentum and Buffett - now there is an oh my!

  • S&P 500 (SPY): 318.22 is a gap that must fill. 315 pivotal, 310 support
  • Russell 2000 (IWM): 141 then 137 support, 146.50 resistance
  • Dow (DIA): 257 support, 262.50 resistance
  • Nasdaq (QQQ): Inverted hammer doji after making new highs; could be forced selling, could be a reversal
  • KRE (Regional Banks): Hinging on support here
  • SMH (Semiconductors): 155 support - 160 target
  • IYT (Transportation): 161.50 pivotal support, 170 resistance
  • IBB (Biotechnology): 137.60 closest support
  • XRT (Retail): 43.40 huge support to hold
  • Volatility Index (VXX): Still in caution phase, but also clears 32.70
  • Junk Bonds (JNK): 104.50 resistance, 101.50 support
  • LQD (iShs iBoxx High-Yield Bonds): New highs again - watch 134.90

Mish Schneider


Director of Trading Research and Education

Mish Schneider
About the author: serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision. Learn More
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