The Stock Market’s Shaky House Has Good Bones

Before I begin, I hope some of you took advantage of last night’s market report on shorting Netflix (NFLX).

Netflix stock (NFLX) began the session lower and proceeded to sell off. NFLX stock price closed lower by over $22.00.

When I wrote, “the slope on the 50 daily moving average is negative. That means the warning phase could escalate to the downside,” I didn’t expect instant gratification.

The power of the charts and phases!

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With that said, the rest of the market looks a bit like the dilapidated house.

NASDAQ in particular, became less inhabitable. Yet that’s ok for those of us who look at the key index and five sectors of the economic Modern Family.

While the Nasdaq 100 (QQQ) hold the top momentum stocks, it’s the Russell 2000 (IWM) that more accurately represents the U.S. economy.

Today, IWM came close to testing the 170 level, the place it broke out from mid-August.

Subsequently, it rallied, closing over a key fast-moving average.

But that’s not the best part of the story.

Do you condemn a house when the deck crumbles while the foundation remains intact?

What is the market’s foundation?

First off, aside from the Family, the S&P 500 held the runaway gap. As stated in the ETF commentary, “as long as it holds 287.75, we are good.”

Secondly, Transportation (IYT) closed green and right near the 205.25 level I have focused on.

205.25 is the low of the day when IYT made new all-time highs on August 21st. I would not say that we should start moving our furniture back into the market’s house just yet, however.

Nevertheless, we can at least continue to find shelter under the intact roof.

Granny Retail (XRT) still has the potential to do some home repairs. A move and close back over today’s highs would be a big help.

Another frequent mention of where to look for speculative interest is in Biotechnology (IBB.) As long as it holds 120, we can cautiously enter the house.

Regional Banks (KRE) are happy with the rising rates. In fact, although it will cost more to borrow money for repairs, any new savings will finally collect some interest.

Semiconductors (SMH) is this week’s wildcard.

108 is the immediate support level. The real key is the 50 DMA lower at 106. Back over 110 would be impressive.

Currently, the market is hardly turn key.

Yet, real estate is funny that way. Some folks love a fixer upper. Others, want everything perfect.

We will see soon enough if the Modern Family puts a bid on the dilapidated market house.

If not, we could be looking at the market going to auction, hoping for  the highest bidder.

S&P 500 (SPY)  Still working a runaway gap, as long as it holds 287.75, good. Worst case you do not want to see-a gap from current levels to below 287.67 that does not get filled.

Russell 2000 (IWM)  170-171 big support to hold.

Dow (DIA)  259 pivotal support to hold

Nasdaq (QQQ)  With the closing price under 185.98, it is possible this has run its course long for the time being. 184 pivotal number. Under there, could see 182 then 180.

KRE (Regional Banks)  Like to see this continue to hold 62.45 and clear 64.00

SMH (Semiconductors)  110 resistance and 108 nearest support

IYT (Transportation)  Broke the fast-moving average and is either going to hold and get back above 205.25, or fail 202 and then 200, which could mean a double top.

IBB (Biotechnology) 120 support to hold. Inside day so if that breaks, looking at 115-116 next area of support.

XRT (Retail)  Has to clear today’s highs to look solid.

Note that you can get daily trading ideas and market insights over on Market Gauge.  Thanks for reading.

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.