Paying attention to the media and all the fearmongering around the debt ceiling, we can see the results to both the futures and stock markets.
I want to take a rare U-turn from technical signals (after this week focusing on the Economic Modern Family) and detail options to resolve (temporarily) this current crisis.
To review the technical macro, the S&P 500 ETF (SPY) failed to clear the 23-month or 2-year business cycle high at 420.
The small caps Russell 2000 ETF (IWM) has not even come close to the 23-month moving average (MA) and is now at threat of breaking the 6–8-year business cycle lows or the 80-month MA. Even more so for the Retail Sector ETF (XRT).
However, nothing has broken down yet.
The market is both fearful and optimistic-perhaps a different way of explaining stagflation?
I learned today that there are other options to temporarily resolve the political quagmire unless-and it seems like a ginormous unless-the White House agrees to a 2-year spending freeze.
(Notes taken from Heather Long WaPo)
How are investors feeling?
Today’s current environment has created a consensus of protecting and preserving capital, yet at the same time, having some money at risk for when trends emerge.
There is always a bull market somewhere, right?
And I think many will agree that the economy should not contract very much more.
But that is a whole different story than the economy can expand-which could take years.
Just look at the monthly charts of SPY IWM and XRT and their 2-year versus 6-8-year business cycles.
We are stuck in between.
Stock Market ETFs Trading Analysis & Summary:
S&P 500 (SPY) 23-month MA 420 Support 410 held
Russell 2000 (IWM) 170 support – 180 resistance
Dow (DIA) Right down to its 200-DMAand a confirmed caution phase
Nasdaq (QQQ) Worst case-a potential reversal top on weekly chart-best case-gets thru the weekly highs
Regional banks (KRE) Did the initial damage now sidelining
Semiconductors (SMH) 23-month MA at 124 with just a few days left-still wonder woman
Transportation (IYT) Like to see this hold 220 this week
Biotechnology (IBB) 121-135 range
Retail (XRT) 56.00 the 80-month MA while momentum is at least flatlining
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.