Stock Market Bears Wait for the Fall From the Wall

With a market up 17% from the December lows, many active investors, including myself, are left wondering if we should still consider this a dead cat bounce?

Or could this be the foundation for a stock market melt up?

Let’s dig in.

Technically speaking, only the Biotechnology Sector (IBB) and Semiconductors Sector (SMH) have entered a weekly bullish phase.

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And both need to close above their weekly 50-WMAs again this week to confirm.

That means IBB must close the week above 109.90 and SMH above 101.06.

What makes that fascinating yet not altogether convincing for more rally, is that as the only 2 MF sectors in bullish phases, both are the more speculated sectors.

Compared to the Russell 2000 (IWM), the Transportation Sector (IYT), Retail Sector (XRT) and Regional Banks (KRE), they are not as accurate for predicting the health of the U.S. economy.

IWM, IYT, and KRE are in caution phases on the weekly charts.

XRT is in a distribution phase.

For those waiting for Humpty Dumpty to fall, what does that mean?

To remind you of what Raymond Lo, Master of Feng Shui and a highly accurate market predictor for the Chinese New Year of the Pig has to say about which sectors could fall:

“…Water industries such as shipping, transport, communication, etc., are not very prosperous.  Also, the money to water industry is fire, which is totally absent.  Metal industry such as banking, machinery, cars, also into unfavorable year as the money element to metal is wood, and wood is totally absent.”

If we translate that into tradeable sectors, IYT (transportation), IWM (encompasses a lot of machinery and manufacturing), KRE (banking), communication (social media and possibly FAANG), and TSLA, General Motors and Ford, could be the places to look for shorts.

Interesting that IYT, IWM, and KRE are among the weakest of the MF.

Economic cycles are key. That is exactly what the Family was designed to do-keep you abreast of those cycles.

Also interesting is that Retail, XRT is the weakest sector.

Lo does say that, “The yin earth element of 2019 is expected to bring prosperity to wood industries and earth industries; this is because wood conquers earth, so the earth element is a symbol of money to the wood industry, which includes fashion, media, paper, books, education and environmental industry. “

Fashion, as part of XRT, could mean that even if the economy falters, there will be certain instruments that outperform. Just like Michael Kors (CPRI) did today, rallying nearly 12%.

The point is, not to trade based on predictions. Rather, to use the guidance to watch certain sectors for a viable trading plan both long and short.

And, in case Dumpty hangs in there or falls from the wall, you will be well prepared.

S&P 500 (SPY) – 271-272.65 now the pivotal support. 273.92 is the 200-DMA resistance

Russell 2000 (IWM) – 150 pivotal support to hold. 151.40 pivotal resistance

Dow Jones Industrials (DIA)  – 249.85 the 200-DMA a good pivotal point to watch. 254 area resistance

Nasdaq (QQQ) – 170.15 now pivotal support-broke it today but closed above

KRE (Regional Banks) – 53.19 pivotal support 55 resistance

SMH (Semiconductors) – 101.06 the 50-week MA and pivotal. 100 now closest support-if fails, could be the toping candle the bears are waiting for

IYT (Transportation) – 180.59 support to hold 187.65 resistance overhead.

IBB (Biotechnology)  – 109.92 the 50-WMA and now pivotal

XRT (Retail) – 44.60 pivotal for the week. 43.50 the must hold spot

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.