Tuesday saw the major stock market indices reverse course… then try to score a late day save.
Let’s review key price levels and themes:
S&P 500 (NYSEARCA: SPY) Still far from the January highs at 286.63. Must hold 277.00
Russell 2000 (NYSEARCA: IWM) If this does not move up over 170 and into new highs, then this was the rally to sell as it has made 3 lower highs and could not clear the reversal topping pattern from June 20th. 166 support held in the clutch today.
Dow Jones Industrials (NYSEARCA: DIA) 250 pivotal.
Nasdaq (NASDAQ: QQQ) 180 pivotal. And if tomorrow closes under 179.56, the low Tuesday, expect more weakness.
Yesterday, we discussed the Queen of the Fairies in Shakespeare’s A Midsummer Night’s Dream.
Her famous line, “What vision have I seen! Me thought I was enamoured of an ass,” for us meant a warning to everyone.
With the summer market thus far volatile, buying the highs and selling the lows, can make you feel as such.
And as we wrote yesterday, “Falling in love with a market until the Russell 2000 (IWM) can make new all-time highs, ditto.”
We have also recently focused on the Russell 2000 and Transportation Sector as the much better indicators for gauging the economic sentiment.
After all, this country’s economy is not dependent on googling or facebooking.
So, with so many folks madly in love with an old bull, no wonder IWM and IYT gave us unrequited love!
In IYT (Transportation), the phase deteriorated back to warning. So did the phase in Semiconductors (SMH).
While NASDAQ started the day with a move to new all-time highs, it ended the day with a potential topping pattern.
More interesting, Biotechnology (IBB), the place the speculators love to run to when they get all enamoured, broke out above the 2018 highs early on.
Then, with IYT and IWM leading the market lower, IBB fell to close well below the old 2018 high at 119.30.
This midday tumble sent interest rates down a tad.
And gold still cannot get a sustaining bid.
Also today, Trump tweeted that he would help farmers with an infusion of $12 billion in aid to counteract the negative impact of tariffs.
If indeed that comes to pass, then my other “tell”-the historically low ratio between commodities to stocks, could shift, which would impact gold and other metals.
Furthermore, if IYT and IWM cannot get back into shape, then the risk of stagflation haunts Powell’s worse-case scenario once again.
A lot will also depend on what happens with the dollar as well.
A move down could really spark some commodites’ requited love, for those of us who have been very patient.
Tomorrow at 6:30 PM EST, I will give a free webinar on How to Profit From the Hottest Areas of the Market In the Second Half of 2018. To register please click here.
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.