Stock Market Update: One Day Does Not a Sector Rotation Make!

iwm russell 2000 etf trading lower investing analysis chart june

Over the weekend I wrote about the ETFs that I follow to gauge the strength of the broader stock market and economy (The Economic Modern Family).

Then Monday I focused on Biotechnology ETF (IBB) as a promising member of the Family to revive.

Today, as mentioned in several interviews yesterday, we need to see follow up by EVERYONE, and not just Sister Semiconductors SMH, who once again rocked it!

“One day does not a rotation make,” means that we need to see the “inside sectors” hang tough.

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In other words, with the Russell 2000 ETF (IWM), Retail ETF (XRT), Regional Banks ETF (KRE) and Transportation ETF (IYT) closing red today, they must not bleed further and find buyers down at these levels to instill confidence in the market and economy beyond the growth stocks.

    Just looking at the Russell 2000 you can see that IWM has not cleared the 50-Day Moving Average (blue) yet.

    IWM remains an underperformer to the benchmark.

    Real Motion shows a bit of a bearish divergence.

    Let’s compare this to Nvidia (NVDA)- the wing beneath the Semiconductor’s stocks wings!

    nvda nvidia stock price peak market top chart june 25

    I am always asked about it, have owned it FOREVER, yet rarely post on it- NVDA. 

    Right now, the reversal top yielded a more than 10% correction (the norm). 

    It slightly underperforms the benchmark with today’s rally. 

    Momentum had a mean reversion and held key support.

    I’d look for a close over 125.60 first.

    then watch for a move back over 127, which will look better. 

    After technical tops, the best result is when it takes out the highs, which in this case is 140.76. 

    Personally, I would love to see 107 as the add spot.

    And let’s face it-it has become more evident that what the rest of the economy and Family do will indeed impact NVDA and SMH- it has to.

    It always does.

    Twitter: @marketminute

    The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.