Stock Market Bears Are Not Aging Well

Michele Schneider

They may have gold-leafed angel wings and paws, but overall, market bears have not aged very well.

I had so many phone calls over this past weekend from people who were panicking about the market given events in Iran.

I directed those folks to my lead sentiment in the weekend Daily:

“Since Trump became POTUS, his greatest skill is his ability to skirt potential crises.

As a trend trader, one would assume he will do the same with the Iranian situation.”

After the market rallied off the opening lows last Friday, today, all four indices held key support and closed the day out green.

The S&P 500, NASDAQ 100 and the Dow Jones Average, all cleared back over their fast (10-DMA) moving averages.

The small caps, Russell 2000 closed green, but not enough to clear its fast moving average.

Hence, the theme we have been talking about for months, the one where the big rollers find constant buyers, while the small caps, transportation index and retail sector lag, prevails.

transportation sector etf iyt price analysis bullish investing chart_7 january 2020

On the left is the Transportation Sector ETF (IYT).

The 50-DMA is at 194.57, which means with a close just below it we are in an unconfirmed caution phase. The magenta line is the 10-DMA. 

The slope on the 50-DMA is neutral making the momentum of the caution phase at this point, also neutral.

The key here for the bulls is that IYT closes tomorrow back over the 50-DMA. Otherwise, the caution phase will confirm. That could take IYT skidding down to test the 50-week MA below at 189.10.

The Russell 2000 ETF (IWM), has to clear the 10-DMA at 165.89 and hold above there.

Otherwise and especially if IYT is weak, IWM could see a drop close to its 50-DMA at 161.00

Two elements are at play. First is the potential for more fallout from Iran.

The second is what happens with Phase One and China.

The S&P 500 ETF (SPY) went to new highs on optimism of the Fed remaining dovish and China coming to terms with the US.

It sold off on Iran, but clearly, still reflects overall optimism concerning China, the Fed and most likely, the ongoing corporate buybacks.

The gold-leaf around the bears represent the hedge we are seeing in the metals.

To watch for a full-on bear revival, keep it simple by watching IYT and IWM. 

S&P 500 (SPY) 324.89 is the all time high. 322 is super pivotal and then 320 after that. 

Russell 2000 (IWM) must clear 167.12 with 165.89 being pivotal and 163.70 acting as support. 

Dow Jones Industrials (DIA) all-time high is 288.63.

Nasdaq (QQQ) all time high is at 216.16 with 212.24 being a pivotal support level.

KRE (Regional Banks) 56.70 is the 50 day moving average to hold.

SMH (Semiconductors) all time high is at 144.94 with 140 being pivotal. Below that and SMH may see a move to 135.

IYT (Transportation) 195 is still a key pivotal price area. 200 is important resistance, 192.74 price support.

IBB (Biotechnology) 121.50 price resistance and 115.50 price support.

XRT (Retail) 45.41 is pivotal. 46-47 is resistance. 44.70 is the 50-day moving average.

Twitter: @marketminute

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.