Stirring the Economic Modern Family’s Soup

Michele Schneider

The week opened with sector rotation.

We came into this week with Semiconductor Sector (SMH) as the strongest of the economic Modern Family of ETFs, and the Transportation Sector (IYT) the next strongest sector.

On the weaker end was Retail (XRT), Regional Banks (KRE) and Biotechnology (IBB).

The Russell 2000 (IWM), gave us a preview of what it could do as far as price, but it closed the week out agnostically.

So today, with the flame under the stock pot, our family’s soup mix saw some sectors rise to the top like boiled carrots, while others sunk closer to the bottom like potatoes.

Granny Retail was the top carrot.

Not surprising after the potential 3-year bottom on the charts at 38.00, plus, the wage growth and strong consumer confidence.

Therefore, we can also conclude that IYT’s performance last week gave us a reliable view into rising demand.

Hence, money rotated out of Semiconductors and into Retail, Transports and yes, Granddad Russell 2000.

Noteworthy is that while retail gained, so has credit card debt by $10 billion, and consumer borrowing by $13.8 billion. 

The yields also rose after lots of Fed speak last week and the comments by Powell on the better-than-what economists-think economy.

That sparked buying in the financials and in regional banks. KRE rose by 3.5% in the best one-day performance since July 24th.

I would say soup’s on, except for one sector that remained weak all day-Biotechnology IBB.

Since we look at that sector as a gauge of speculative interest, we could surmise that today’s Modern Family’s rally has yet to convince the sidelined investors to buy equities.

Soup can be a first course or the main meal. 

As a first course, we will need to see more follow through dishes.

As the main meal, we will need to see some side dishes-like for example more institutional participation into Biotechnology.

stock market etfs performance analysis september chart images

Going from left to right, top to bottom, although we have been here before, IWM cleared the 50-WMA or the blue line. That puts it into an unconfirmed bullish phase on the timeframe.

The week just began though, so it must stay above that level.

KRE cleared back over the 200-WMA or green line.

That too must hold. 

IYT handily held its 50-WMA. Through 190 we could see a bigger move up near 200.00.

XRT has a weekly death cross. In fact, last week we thought that it’s possible that by the time XRT sees 44.00 or a retracement to the 2 WMAs, the top of the market will be in.

Possible.

IBB has to at least cross the 200-WMA or the green line.

SMH is entitled to a rest day after she single handedly stirred the soup with its flavorful seasoning.

What we will watch for now, is if this soup is thick or clear.

Plus, we will taste test the soup long, once all the ingredients blend together. 

S&P 500 (SPY)  300 will be the resistance with ATH 302.23. Support at 296.64. 

Russell 2000 (IWM) Support at the 50-DMA at 150.78 as this enters an unconfirmed caution phase. Ideally it should close over the 200 DMA and 50-WMA at 152.15. 

Dow Jones Industrials (DIA) 265.81 is the 50-DMA which is now the number to hold. 270 area resistance to clear

Nasdaq (QQQ) 189.13 the 50-DMA cleared making that the key support. It must continue to lead with all-time highs 195.55

KRE (Regional Banks) Closed over 52.10. Over 53.15 gets real interesting.

SMH (Semiconductors) 118.00 area is the support to hold so the gap remains. Resistance 121.43 then ATH 123.56

IYT (Transportation) 189 the closest most meaningful pivotal number.

IBB (Biotechnology) The 200 WMA at 102.64 did not clear.

XRT (Retail) Unconfirmed recuperation phase. 41.14 point to hold with 43.15 the next resistance, then 44.00

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