Stock Market Update: Tower of Power or Twin Peaks Erosion?

NASDAQ 100 (NASDAQ:QQQ) and the Russell 2000 (NYSEARCA:IWM) gained enough wind power to get close, but not quite clear their all-time highs.

The S&P 500 (NYSEARCA:SPY), not even close to the 2018 highs, worked its way towards 280. Yet, it stalled at 279.01, today’s high. Let’s review the levels and themes.

S&P 500 (SPY)  All gaps filled. 280.41 the last swing high in March. If cannot clear, we will watch for 275 to hold.

Russell 2000 (IWM)  Could be the twin peaks double top. Under 165 would be troublesome.

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Dow (DIA)  Confirmed the bullish phase. 246.45 the 50 DMA support with a lot of resistance the whole way up

Nasdaq (QQQ)  177.98 the all-time high with today’s high 177.72. Will it clear? Stay tuned.

The Modern Family sectors, except for Semiconductors (SMH), struggled in the face of the stronger indices.

Of particular interest to me is Transportation. As mentioned in the previous Daily, “IYT trades below the 50 DMA. That makes 192.60 resistance, which if cannot clear, will provide us with a great risk point.” Today, Transportation stocks spent a very brief period above that risk point, but quickly sold off.

That, and the not-so-surprising eventual sell-off in the Russell, made for a mixed day with the rotation into Technology.

Biotechnology, Retail, Regional Banks and Transportation, or 4 of the major Modern Family sectors, closed weaker. In the past, when Tech takes over the rally, the results have varied.sIf we go back to 2017, Semiconductors led the entire year. So much so, we called SMH Wonder Woman. That rally prevented the Russell’s for example, from falling apart, thereby tagging along. On the flip side, SMH peaked first this year. That peak high in March did not faze the Russell’s. That is because the economy was growing while Tech became tired. The question this action brings up is, who’s right, right now. In our quest to determine if today’s rally will create twin peaks or the impetus for the others to keep moving higher, we. may need to be a bit more patient.

Broadening our quest for answers, we turn to the financials. Also mentioned in the last Daily, “Banks (XLF KRE), are in a bearish phase.”

“With bank stocks reporting earnings, 27.50-27.65 is the area to watch in XLF. Like with IYT, if begins to turn down, there is your risk area.”

Here is another reason that patience to see if SMH’s will lead or if this move today is more of the last minute buyers getting in way too late, makes sense.

Let’s go further.

The Dollar gained strength and the interest rates eased a little bit.

Commodities, with the exception of steel, declined. Oil advanced.

Putting that together, the stronger dollar had some impact on the metals and soft commodities.

But today’s action in commodities does little to clarify the tech rally versus Modern Family conundrum.

Should Semiconductors continue to take the lead, it would, at the very least, be a reason for the bears to retreat.

However, should the last-minute tech buyers dry up and bring out the sellers, expect twin peaks erosion.

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.