The stock market was indecisive yet again. A big rally in the morning gave way to selling in the afternoon.
So what’s next? Let’s review the levels first, then we’ll get into themes, trends, and analysis for Friday.
S&P 500 (SPY) Inside day. 291.00 is the fast MA and now pivotal.
Russell 2000 (IWM) 169.22 the pivotal 50 DMA could not clear. This confirms the warning phase. A weekly close under 167.22 bad.
Dow Jones Industrials (DIA) Inside day. Topping pattern with 263.98 the fast MA pivotal support
Nasdaq (QQQ) 183.40 pivotal support which if fails along with the other indices weak, trouble. For now, 187.25 resistance
KRE (Regional Banks) Even more of a disaster today–Under the 50-week MA, first time since a year ago
SMH (Semiconductors) Warning Phase-a weekly close under 104.25 a first since 2016-this is what keeps me up at night
IYT (Transportation) 206.80 fast MA resistance. A move under 202 or the 50 DMA not great
IBB (Biotechnology) 120 support to hold-but unless this takes out the recent swing high, this was just a bounce.
XRT (Retail) 51.30 is the fast MA. If clears must also get over 51.80. If not, watch the weekly MA which comes up next or around 50.15
Our featured image is a garbage compactor… with knobs and levers to operate. And the operator needs protective gear.
If we take that analogy to the markets, how much garbage it eats and breaks down each day, also seems to adjust accordingly.
Fed raises rates, GDP estimate comes out at 4.2%, and durable goods for new orders decline after four straight months of strong gains.
These are some of the stats the market has had to digest in the last 2 days.
Concerning price, the US dollar gained in strength, yields strengthened a bit, oil rose and the metals declined.
The Russell 2000 also gained.
However, it could not get back over the 50 DMA so the warning phase has been confirmed.
Transportation, also rose. In a bullish phase, the bounce was not enough to clear back over the fast-moving average resistance.
Friday is the last day of the month and quarter.
Will the quarter’s end prove that the market can or cannot digest garbage and turn it into treasure?
The happiest sector this week is NASDAQ and particularly FANG.
QQQs bounced off the 50 DMA earlier in the week. As the week progressed, that rally steepened.
New highs? Not at this time.
Every rally lately, should be evaluated by how shallow or deep it is.
In the case of QQQs, led by Facebook (FB) and Amazon (AMZN), the rally is neither shallow nor deep. In other words, none are near the highs, but the percentage of this rally is impressive.
Yet, as you know, a rally in QQQs does not necessarily translate to a rally in the key economic components.
Looking at Transportation, I would not even call this a rally.
Considering this is a correction from the new highs with the topping candle that ensued, here is where we need to keep focus.
Especially given the warning phase in the Russells, unless the whole picture changes tomorrow and both find a huge number of buyers, we will consider this shallow.
What would help deepen a rally in IWM and IYT?
If the yields consolidate or head lower while the dollar rises, that could help the small caps or supply.
However, if yields rise from here and the dollar drops, we might see IWM and IYT fall further.
Should the dollar and the yields rise together, at the very least, the lagging financial sector could kick into gear.
If you find this confusing, it is.
Warning phases are just that- a warning. However, they do not necessarily provide reasons to throw the trash into a giant compactor.
Therefore, until we see either the Russells move up or down decidedly, and a clearer trend emerge in the dollar and rates, keep your protective gear on.
Keep your protective gear on.
Twitter: @marketminute
The authors 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.
