The “Economic Modern Family” is made up of several key economically sensitive ETFs. We analyze each ETF, as well as the aggregate, to gauge the health of the stock market. Currently, these ETFs hold onto election uncertainty – potential gridlock if Biden is elected and the senate majority stays republican.
As such, certain sectors of the modern family did very well, while others not so much.
Anticipating that taxes will not increase and interest rates will stay low, the traditional superstar, the Semiconductors Sector ETF (SMH) not only made new all time highs, but had the largest percentage gain week to week.
While in stark contrast the Regional Banks ETF (KRE) eked out a small gain.
One could say that the difference between the two reflects the differences we are seeing as a country, both economically and politically.
The semiconductors, although a cyclical, have benefited from the speculative interest from investors.
Growth has prevailed over value, but as we know semiconductors are a part of the economy, but do not represent the true economy.
That is where Regional Banking ETF (KRE) comes in.
Regional bank stocks more accurately measure the pulse of the money that is being borrowed and spent in the rural communities of the United States.
These banks also have relationships in oil and gas, a mainstay in many rural economies.
We could say that is because of the pandemic as tech has prospered with the stay at home environment, while oil and gas has taken the biggest hit.
So what does the rest of the Economic Modern Family tell us?
Looking at the weekly chart of Russell 2000 ETF (IWM) and layering in the election opening range where we buy over the weekly high and sell under the weekly low, Gramps over 165.71 should send prices higher and a move under 153.67 should send prices lower.
The challenging part of this, is what we do in the middle of that wide range.
Trade stocks in the IWM basket cautiously!
In the Transportation Sector (IYT) we have a much more compelling opportunity as not only can we use the election range breakout, but it also had an inside trading week, trading inside the week before.
Therefore this might be the best place to focus on as a move above 207.30 should be bullish, while a move below 195.87 should be bearish.
Not as clean as IYT, the Retail Sector (XRT) also could be setting up with a buy over 54.24 and short under 50.
The trading range of Biotechnology (IBB) has greatly impacted earnings and headlines, which makes it much more difficult to navigate.
Putting it all together, any level of optimism should bring buyers to our “inside” market sectors IWM, IYT, XRT.
Conversely, should the market turn over, SMH sticks out as the overvalued sector, once again.
S&P 500 (SPY) Resistance to clear at 352. Support 346
Russell 2000 (IWM) Watching for a break over the range from Nov 2 to Nov 6. Support 158.50.
Dow (DIA) Resistance from October High 297.46. 290 Support.
Nasdaq (QQQ) Held over 50-DMA, with next resistance at 297 october high.
KRE (Regional Banks) Gap to fill 43.01. Held the 10-DMA as possible support for Monday.
SMH (Semiconductors) Another new all time high.
IYT (Transportation) Confirmed bullish phase change over 50-DMA.
IBB (Biotechnology) Support 135.51 the 50-DMA
XRT (Retail) 52 Support. 55.26 Resistance.
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.