On Monday the ‘Economic Modern Family’ of stock market ETFs which consists of 1 index and 5 key sectors showed mixed signals as half of the ETFs closed down for the day.
The Russell 2000 ETF (IWM), Biotech Sector ETF (IBB) and Semiconductors Sector ETF (SMH) closed down while the Transportation Sector ETF (IYT), Retail Sector ETF (XRT), and Regional Banks ETF (KRE) closed up for the day.
With SMH lingering in all-time high territory, IWM and IBB are the most worrisome of the bunch, as both sit near pivotal price levels made by their major moving averages.
For the Russell 2000 (IWM), the 50-Day moving average at $222.28 (Blue Line) is being tested. And Biotech (IBB), much weaker, is sitting just above the 200-Day moving average at $145.55 (Green Line).
The key difference is their behavior around their daily moving averages (DMAs).
For example, if you look at IWM, you can see that it has broken through its 50-DMA 4 consecutive times in the last 4 trading days.
IBB already broke its 50-DMA but now has respected its moving average.
Out of the 4 recent days it came close to breaking, it only broke once on March 5th.
This shows that if IBB breaks its 200-DMA and closes under, it will have much more meaning.
It could impact the IWM to finally break its 50-DMA.
Because IWM cannot be trusted to hold its moving average, we can look at the bigger picture as the 50-DMA represents more of a price range to hold near, than a specific price level to put technical weight on.
This means that for Tuesday’s trading session, if IWM decides to head lower it will need to hold recent support of $219.39 from the April 8th, while IBB needs to hold over its 200-DMA at 144.55.
If IBB does break under its moving average and into a distribution phase always watch for a second close under the moving average to confirm the phase change.
Watch Mish go through 10 symbols of key stocks reporting this week with actionable trading plans.
S&P 500 (SPY) Made New highs.
Russell 2000 (IWM) 219.39 support. Resistance 226.69
Dow (DIA) 333.43 support.
Nasdaq (QQQ) 338.19 high to clear. Support 321.40
KRE (Regional Banks) Needs to hold over 68.15.
SMH (Semiconductors) Bounced off the 10-DMA 250.07.
IYT (Transportation) New highs.
IBB (Biotechnology) 145.55 support.
XRT (Retail) Needs to clear 93 then 96.27.
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.