Stock Market Theme: Collect $300 or Go Directly to Jail

Michele Schneider

Please forgive the adult version of the game Monopoly.

This stuck out as it was within immediate reach on our shelf, while the Monopoly game sits somewhere hidden in a closet.  

Before you jump to all kinds of conclusions-this game was a gift. A fun one at that.

The idea though, is that the stock market feels like an X rated version of Monopoly.

Only, instead of buying and trading properties, we are buying and trading news headlines.

Buy or trade it correctly and you can easily collect $300.

Do it all wrong, and it’s “Go directly to jail.”

In XXXopoly, you trade other things and nobody goes broke-but that’s another story.

In all cases, you want to roll the dice to accummulate wealth and avoid bankruptcy.

And there’s my point.

I trade because I prefer not to base our fortune on a roll of the dice.

Rather, I prefer to trade because the board makes sense and I can at least control the risk/reward.

With that said, what Chance card has the economic Modern Family pulled through all of this? 

Before we begin, a comment about last week’s Daily on buying FXI and selling SPY.

It already started working on Friday. The ratio is 7:1 in that the SPY is trading at a 7x greater price than FXI. You position size accordingly.

My final comment on that Daily was this, “The bigger theory on this hedge is that ultimately, China outperforms the U.S. regardless of the trade outcome.”

stock market etfs performance analysis outlook week october 14

The charts of the Economic Modern Family are on a weekly timeframe.

Top left is Granddad Russell 2000 IWM. Nice try Gramps, but IWM did not close over the 50-WMA. So, a perfect inflection point for Monday.

Regional Banks KRE, like Gramps, went all lavish in Prodigal Son fashion, and yet, came crawling home with a price under both the 50 and 200-WMAs

Transportation IYT did exactly the same. Pierced the 50-WMA and closed below. The phase remains in caution.

Granny Retail XRT never tried to pierce those weekly MAs. She got close but sat down to rest instead. Phase is bearish.

Biotechnology IBB, or where the public runs to, ditto to Granny. Maybe that is the best news-the public is still relatively uninvolved. 

Then there is our mighty sister Semiconductors SMH. I hear she’s a party girl and loves XXXopoly. She might have gotten carried away though. SMH made a new all-time high early on and closed below the old all-time high from July. Hangover? Perhaps.

Monopoly means “exclusive possession or control of the supply of or trade in a commodity or service.”

The game Monopoly, created in 1903, was meant to demonstrate that an economy which rewards wealth creation is better than one where monopolists work under few constraints.

The Sherman Anti-trust Act of 1890, enforced in 1911 when Standard Oil tried to dominate the oil and railyard business, broke up monopolies.

These days, headlines have the monopoly on the price action, which clearly has created lots of wealth, but also lots of losses.

However, the markets will eventually adjust. As history has proven, nobody or nothing can dominate the market forever-and that goes for XXXopoly too.

S&P 500 (SPY) Inside week-how about that? Wild swings in a range. 293.34 pivotal support or the 50-DMA. 300 resistance 

Russell 2000 (IWM) 148.50 support and 151.95 resistance. Still had an inside week too.

Dow Jones Industrial Average (DIA) Inside week. 264.50-265 pivotal support 270 resistance.

Nasdaq (QQQ) 188 pivotal support 193.30 resistance.

KRE (Regional Banks) 51.35 support 52.80 resistance-also an inside week.

SMH (Semiconductors) 120 support and 124 resistance.

IYT (Transportation) 185 resistance with support at 181.25

IBB (Biotechnology) 100 pivotal 102.50 resistance.

XRT (Retail) 43-44 huge resistance. 41.50 support.

Twitter: @marketminute

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.