The Stock Market Drives Into The Fog

Michele Schneider

Last night I reviewed the predictions made by astrologists for The Year of the Chinese Earth Dog.

“The 2018 Year of Dog represents Grave of Fire, which means the optimism of fire is going down and the pessimism of water will come up. The fire element will not return until 2025.” – Raymond Lo

I also put some technical analysis on that.

The Transportation Sector ETF (NYSEARCA: IYT), the Russell 2000 (NYSEARCA: IWM), Semiconductors ETF (NYSEARCA: SMH), and Regional Banks ETF (NYSEARCA: KRE) – the Economic Modern Family – all are below their 50-week moving averages.

Only the S&P 500 (SPY), the Dow Jones Industrials (DIA) and NASDAQ (QQQ) are still holding their 50-WMAs.

With one day to go in the week, are the other 3 stock indices driving into the fog?

SPY’s 50-WMA comes in at 274.30. DIA at 249.85. QQQ’s at 169.17.

That makes those levels critical to the next big move.

With IWM and nearly all the rest of the economic Modern Family below the 50-WMA, should any of the others join them, the fog will thicken.

Part of the issue is the interest rates. Yet, those who attach sole blame on rates, may be a bit myopic.

The Fed cannot afford to reduce the interest rates. It will create havoc.

The dollar, now stronger given the emerging markets’ weakness, would decline.

That would most likely spark an inflationary environment.

Moreover, oil may have come down in price on the exchange, yet the price of gas at the pumps is higher than it’s been for years.

The last thing we want is a weaker dollar, commodities on the rise, and the Fed having to increase the pace of juicing the rates.

Keep that all in your mind, as that is the road you see that leads to the fog.

Should this week end on a high note (and I mean high-like another 500-point rally day), then perhaps all this will be a typical correction.

IWM and the other sectors are already below their 50-WMAs.

If any of the other 3 stock indices also trade and close below the 50-WMA, the fog will turn into the pessismism of water.

Let’s review key trading levels across the ETFs:

S&P 500 (SPY) – Clutch hold of the 200 DMA.  282.20-282.90 the resistance levels. 276.50 pivotal. 50-WMA 274.30

Russell 2000 (IWM) – 155.76 is pivotal with 159.40 huge pivotal resistance.

Dow Jones Industrials (DIA) – 254.50 pivotal. 251.53 the 200-DMA and 249.85 crucial support

Nasdaq (QQQ) – 171.97 the 200 DMA. 174.86 pivotal resistance. 169.17 crucial support

Regional Banks (KRE) – Sideways action which is not a reason to be bullish-I’m fairly certain this has more downside

Semiconductors (SMH) – 98.79 now pivotal resistance. Looks weak

Transportation (IYT) – Seems so unlikely this can clear back over 192.90. If it does, buy everything. If not, 180 in focus

Biotechnology (IBB) – 115.70 resistance to clear and 111 the best underlying support to hold

Retail (XRT) – Just failed the 50-WMA at 47.07-if closes the week below, ouch

 

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