As concerned as we were about the weaker stock market sectors, that fact that the Russell 2000 (IWM) never had a bona fide reversal topping pattern, kept us in our longs.
As well, the Transportation Sector ETF (IYT), even more so than the Semiconductors ETF (SMH), held recent gains, also keeping us from getting bearish.
When I stepped outside this morning, our tree, which literally has been bud-free, today, sprouted green shoots.
As did the Russell 2000 Index and its ETF (IWM)!
That in turn, helped the other weaker sectors.
The Biotechnology ETF (IBB) rose over 2.0% leaving dust in its trail over the 200-week moving average.
The Retail Sector (XRT) and Regional Banks (KRE), both cleared back over their 50-day moving averages for unconfirmed recuperation phases.
So, yes, divergence among the Modern Family remains.
However, the weak rallied in a grand attempt to grow from green shoots to leaves.
So what now?
On April 10th, I wrote a Daily called, The Stock Market Hires the Bug Bouncer.
At the time, after a good rally in small cap stocks (IWM), we saw that “XRT (along with Regional Banks KRE) remained under their 50-week moving averages.”
We surmised that, “What could happen, is that by the time XRT and KRE reach their 50-WMAs, IWM, SMH, IBB and IYT will make new swing highs.”
Let’s revisit that thought.
KRE has a huge trip to get to its 50-WMA (blue line) at 57.09.
XRT has even a bigger trip to its 50-WMA at 46.87.
What we had not counted on April 10th, was that Biotech would sell off.
Now, IBB also has a large distance to fill to its 50-WMA at 110.75.
Meanwhile, a new swing high for IYT is a move over 198.65. Did not happen today.
For IWM it’s a move over 158.16. Did not happen today.
SMH, not only made a new swing high, it made a new all-time high at 118.89.
That gives us two possible scenarios for tomorrow.
The IWM and IYT do not make new swing highs and XRT KRE and IBB sell off. Also possible, SMH runs out of steam and fails 117.80.
IWM IYT (or some combination) do make new swing highs, and XRT KRE and IBB continue to play catch-up.
However, if XRT KRE and/or IBB manage to hit their 50-WMAs, I would not be surprised if that turns out the top, as in the top!
S&P 500 (SPY) – Swing high at 293.14 with all-time high 293.94. 289.67 immediate support.
Russell 2000 (IWM) – 156.04 the 200 DMA now support and 157.15 the 50-WMA critical to hold.
Dow Jones Industrials (DIA) – Swing high at 266.86. That means must hold 265. All-time high 269.28
Nasdaq (QQQ) – New all-time high at 190.54. 188 now the support to hold.
KRE (Regional Banks) – 54.08 the 50-DMA now needs to hold for a second day.
SMH (Semiconductors) – All-time high at118.89. Looking like it was pushed up there with signs of fatigue. 117.80 key support.
IYT (Transportation) – Swing high at 198.65. December 2018 high 199.09. 195.90 key support.
IBB (Biotechnology) – Rallied off the 5=200-WMA but into resistance at the 100-DMA at 107.89. Good high-volume reversal though.
XRT (Retail) – Rescued by holding 44.43 the 200-WMA. Now has to clear 45.50
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.