In the world of large cap and technology stocks, Friday was an interesting trading day in the stock market.
Lots of large cap tech stocks touched down on their 50-Day Moving Averages.
To name a few: JD.com (JD), Baidu (BIDU), IQ, Netflix (NFLX) and Microsoft (MSFT).
With investor sentiment and risk on/off gauges flashing bearish, these big guns are at make or break points for Monday.
Any of these could leave more distance between them and their 50-DMA.
Or, they can easily break them and lead the whole market significantly lower.
After enjoying a week or so of low volatility, the past week ended with fear returning, thereby forcing traders to pay more attention.
The US Dollar declined even further, while the metals-gold, silver, palladium, copper, and platinum held gains or posted more gains.
The 20+ Year Treasury Bills also rallied, however right into key resistance.
Bonds may not turn out the traditional safety play one would expect given the turn up in commodities and the turn down in the greenback.
And also noteworthy is that Junk Bonds JNK, rallied Friday closing above the 50-week moving average. This is the best example of “Don’t Fight the Fed!” (especially ahead of the Fed meeting)
Yet, quietly, reliably and clarifyingly, our Economic Modern Family will help us decide what to do this coming week. A week by the way, with lots of earnings on tap.
Before we get into the Family, I did two sessions for StockChartsTV last week.
Your Daily Five goes into the Robin Hood Traders and some of the list of stocks they have bought. Plus, I cover the growing megatrend of Socially Conscious Investing. https://www.youtube.com/watch?v=Ep_2gc-sqlk
On Friday, I did a session called, Suffer From Fear of Missing Out? https://www.youtube.com/watch?v=eYeGGodZx_g
The segments are as follows:
Buying Late to the Party
Buying a Falling Knife
Managing a Stop Loss
Managing Profit Targets
Deciding on a Trailing Stop
Now back to the Family.
Granny Retail is doing the heavy lifting, which is amazing considering XRT (mainly brick and mortar) has lagged for years.
Granddad Russell 2000 IWM failed to close above the 50 and 200-WMAs. It will come down to who is stronger for the whole market, I believe. Can XRT drag IWM up or vice versa?
Big Brother Biotechnology IBB proves the harder they are, the harder they fall. However, unless it breaks below the channel line, this is a healthy correction.
Prodigal Son Regional Banks KRE gave the market a pass by not breaking down completely. The question now though, is can banks hold the recuperation phase and move up further?
Our Tran, Transportation IYT, touched but could not clear the 50-WMA on a closing basis for the week. But it was an inside week. That means there is a lot of room down, and if Granny and the big gun stocks hold, a potential for it to clear the last 2 weeks highs.
Sister Semiconductors SMH did exactly what I wrote about a week ago-“The top of the channel comes in at 165-168 serving as resistance… if SMH gets to the top of the channel, cannot clear, and begins to turn lower, I would have no issue going short into failed strength.”
It seems relatively simple to me.
Watch Retail. Watch the NASDAQ stocks that retraced to their 50-DMAs. Watch JUNK bonds and the dollar.
If they all hang in there, do not get sucked into the headlines.
If the dollar falls much further, or any of these others cannot hold, perhaps the punch has truly worn off.
S&P 500 (SPY) 320 held and has to continue to
Russell 2000 (IWM) 146 support 150 resistance
Dow (DIA) 270 now resistance 262.50 support
Nasdaq (QQQ) 262 now resistance with support at 250
KRE (Regional Banks) Confirmed recuperation phase. 37.70 the 50-DMA
SMH (Semiconductors) 160 pivotal 155 support
IYT (Transportation) 172.75 the 200-DMA failed to hold
IBB (Biotechnology) Closed at 136, the big support
XRT (Retail) 45.00 support, 46 pivotal
Volatility Index (VXX) 31.03 resistance
Junk Bonds (JNK) Cleared 104.95
LQD (iShs iBoxx High yield Bonds) Gentle correction
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.