Stock Market Update: An Economic Family That Trades Together…

As I like to do on occasion for the weekend wrap-up, here are the weekly charts of the economic Modern Family to review.

From top left to right:

The Russell 2000 IWM (Granddad). Transportation IYT (Tran). Retail XRT (Granny Brick and Mortar).

From bottom left to right:

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Biotechnology IBB (Big Brother). Regional Banks KRE (Prodigal Son). Semiconductors SMH (Sister Semi’s).

In what will be considered a legendary week filled with intimation rather than substantive news, all the Modern Family sectors rallied in unison.

Last weekend, I featured only the Regional Banks KRE.

The logic was that this sector began the weakness, so once it touched down on 2-year lows, it would most likely lead the market back up.

Did that ever turn out to be the case!

Now we wonder, when will the Prodigal Son go humbly home to ask for forgiveness after this lavish rally?

stock market etfs economic sensitive analysis investing january 21 week

Is this dead cat bounce nearly dead, or will we see more continuation since that December 26th low?

Sticking strictly to the technicals, KRE closed the week of 1/11/19 at 49.98 and closed this past week at 53.25.

At the time when we dissected this sector, IWM, IYT, and IBB were already back above their 200-WMAs (green line).

Once KRE joined the party, it helped IWM and IYT in particular, rally more into a daily Recuperation Phase.

Since SMH never broke the 200-WMA, that sector played catch up, which is more evidenced on the daily chart (it too is back in an unconfirmed Recuperation phase.)

Notice that SMH still has a very long way to go to rally to its 50-WMA (blue line).

Granny Retail, by the end of the week, barely closed above its 200-WMA.

The Retail sector as a laggard, is not a healthy sign-it remains 70% of the gross domestic product.

If in the coming week, XRT fails back below the 200-WMA, we can view that as a foreshadowing of the damage the government shutdown will do to the economy, (once we can actually receive economic statistics again.)

Biotechnology IBB, now has the distinction as the only MF sector to test (and marginally close above) its 50-WMA. But we know that the public loves to buy here.

The rest of the MF are not even close to their 50-WMAs.

Plus, all the slopes on the overhead 50-WMAs are negative.

From a weekly phase standpoint, IWM, IYT, SMH and KRE are in Caution phases. And XRT is in a weak and unconfirmed Caution phase (the 200-WMA has a negative slope).

IBB is in a weak and unconfirmed Bullish phase.

To sum this all up into context, Caution is not Bullish. Biotech is not a great indicator for the economy. And further weakness in XRT could be foreboding.

But let’s go back to our Prodigal son KRE.

First, I hope many of you got long over 50.25 (the level mentioned it had to clear in last Sunday’s Daily).

Secondly, should KRE fail 53.00 and close below, I’d take profits and raise trailing stops.

If it continues on up, we have 55 as key resistance.

If KRE breaks 53 and keeps dumping, then I would not be surprised to see a quick drop back down to 50 before we re-evaluate.

And watch IWM as well. This rallied into so much resistance, it will take fact and not intimations to take the price above 147-148.

So, if KRE falters, and this breaks below 143.50-144.00, the cat’s meow could become the bear’s roar.

S&P 500 (SPY) – 264.88 is pivotal underlying support. 269 the next area of huge resistance

Russell 2000 (IWM) – 147.40 is the weekly chart pivotal number. Then, even bigger resistance at 150-151. Under 144 trouble

Dow Jones Industrials (DIA) – Confirmed Recuperation Phase. 248.90 is the overhead and negatively sloped 50-WMA

Nasdaq (QQQ) – 164.57 is the pivotal point on the weekly chart. Huge resistance at 160.60 and under 164.57, 161.35 area next support.

KRE (Regional Banks)  – 52.96 pivotal

SMH (Semiconductors) – Got the new life over 91 alright. 93.33 its major weekly chart resistance

IYT (Transportation) – 180.68 big overhead resistance and must hold 178

IBB (Biotechnology) – 110 now pivotal area for Tuesday.

XRT (Retail)  – 43.75 pivotal support. 44.78 pivotal for Tuesday.

Twitter:  @marketminute

The authors 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.