Stock Market Ends Week with Duplicity

Michele Schneider

While the strong jobs report rocked the historically low yields up a bit and knocked the gold market down, there was a different story going on.

Let’s discuss.

The stock market wants to see the Federal Reserve lower rates in July. That much is clear.

So it’s easy to see why the Dow Jones Industrials (INDEXDJX: .DJI), S&P 500 Index (INDEXSP: .INX) and NASDAQ Composite (INDEXNASDAQ: .IXIC) didn’t like the bump up in yields. All three indexes closed lower.

At the same time, the broader market wants a strong economy.

That’s the perverse relationship between good news and a sell off or vice versa.

The market wants higher inflation. 

Global slowdown is still an issue.

The market got a rise in yields and the dollar instead.

Oops.

With no signs of inflation.

Oops.

That puts the Federal Reserve in a tough spot.

Economically, they have little reason to lower rates.

Inflation wise, they do.

Like our duplicitous party goer, the market is both happy and concerned.

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Money continued to rotate out of SMH Semiconductors, although SMH remains in a bullish phase.

Retail XRT had a nice run on Friday. In fact, it cleared the 50-DMA and had the largest percentage gain.

We still want to see XRT clear 43.15 and KRE (which also ran up on Friday with the same percentage gain as XRT), clear 55.10. 

If KRE continues higher,  we can also have a repeat of May 3rd.

That is the day that KRE hit it’s 50-WMA. It was obvious that it struggled to reach that level and therefore, spelled the top of the overall market for about a month.

Transportation IYT closed right on its 50-week moving average. Key pivotal sector for Monday. 188.63 is a number you should all write down.

The Russell 2000 IWM, held where it needed to. Now, it must clear and close over 158.20 to keep going.

Biotechnology IBB, fell back below its 50-WMA at 109.44. That is a key number to look at as well.

For the coming week, keep looking forward to watch the party revelers like XRT, KRE and IWM.

But also look behind you to see how SMH, IBB and IYT make out.

S&P 500 (SPY) – 298.82 printed a new all-time high. 297 pivotal and support at 294.25. 

Russell 2000 (IWM) – 154.75 is the major pivotal 50-WMA to hold. 158 and 161 resistance overhead. 

Dow (DIA)  – 269.60 the new all-time high. 267 support.

Nasdaq (QQQ)  – 191.44 the new all-time high. 188.25 support.

KRE (Regional Banks) – 53.75 the 200 DMA to hold now. 55.10 overhead resistance.

SMH (Semiconductors) – 115.70-116 resistance. Support at 109.60

IYT (Transportation) – 190 first level to clear again. Support at 188.63 key.

IBB (Biotechnology)  – 109.45 pivotal. 108 support 111.50 resistance.

XRT (Retail) – 42.45 pivotal area-has to get back above 43.15. Support at 41.75

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