The stock market was buoyed on Monday by strong days from the Transportation Sector ETF (IYT) which closed higher by +1.4% and the Retail Sector ETF (XRT) +2.11%.
Theses two sectors are currently attempting to lead the market higher, but are having trouble getting other members of the Economic Modern Family to join in.
The rest of the family includes the Russell 2000 (IWM), Regional Banks (KRE), Semiconductors (SMH), and Biotech (IBB). Each of these members is close to their 50-Day moving average and in the case of SMH, that broke underneath the MA on Monday.
In past news articles, IYT leading the market has been a recurring theme. The movement of goods correlates to underlying economic strength as consumers drive the fundamentals of company earnings via supply and demand.
Additionally, IYT can be especially useful right now, for its opposition in price when compared to other Family members is clear. This shows a deeper layer to the Family’s overall price action.
A clear stock market move is when all Family members head in the one direction at the same time.
While this is a rare event, it sets the definition for analyzing the ideal market direction.
This allows us to dissect the general stock market picture based on that standard.
Therefore, we should watch for all the members to hold over their 50-DMA as the nearest support level and for SMH to either stay close to its 50-DMA or clear back over.
IWM should also begin to head back over resistance from the $230 area because the more time spent underneath will create worry and choppy market conditions. This is what we can look for from a bullish standpoint.
However, this relies upon the continued support from the transportation sector.
If IYT becomes weak and begins to head back towards its major moving averages, stay cautious as the market could begin to rotate money into safer holdings.
S&P 500 (SPY) Resistance 420.72.
Russell 2000 (IWM) Resistance 230.95.
Dow (DIA) Needs to clear 342.43.
Nasdaq (QQQ) 333.97 support.
KRE (Regional Banks) Support 67.32.
SMH (Semiconductors) Broke support from the 50-DMA at 242.
IYT (Transportation) New highs.
IBB (Biotechnology) 153.28 pivotal.
XRT (Retail) 96.27 resistance.
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.