Once again, I saw lots of bullish calls for the market.
I really hope that our friends who have never lived through a sustained bear market learn the difference between a shallow bounce and a bottom!
That’s not to say that a bounce cannot be substantial or even last for a few days.
Nor, is it to say that there aren’t any stocks that will go counter and/or outperform the market.
Nevertheless, the fundamentals driving the negative sentiment in the market have not changed.
With yields and the US Dollar firm while oil prices remain cheap, finding instruments that will hold up in the face of these factors is key.
And we should not forget about the upcoming G-20, existing tariffs, and for now, deflationary factors.
Furthermore, we still have our burgeoning debt.
You get the point.
However, we cannot deny that Monday’s action will excite the bulls and encourage the passive investors.
The simplest way to track the market is by watching the economic Modern Family.
The Russell 2000 IWM, has not had a textbook bottoming pattern. The phase is bearish and it trades below the weekly and monthly MAs.
Yet it does have a wall of support at the 145. Assuming you believe a bounce is overdue, you could wait for a close over 150 and risk under 145.
But, you must think about the risk/reward-can IWM rally to 160?
Retail XRT, which should shine given the holiday season, did manage to clear back over the 200-week MA.
Yet, it did not have a textbook bottom although it has a better position than IWM does on the weekly and monthly charts. With a better risk, just under 45.00, maybe this can see its way up to 47.50.
Transportation IYT, had a death cross today. With its support at 175-176, it first must close over 190. Then, perhaps we can get up to 194. Although, if IYT fails to clear and hold over 190, I would be very cautious.
As far as the others, Semiconductors, Biotechnology and Regional Banks, the picture is mixed.
SMH has to hold over 92.50 and not fail 90.00.
IBB has to hold 100-101 and show some muscle over 104.70-especially by Friday.
KRE must hold over 55.00 and clear 56.20 area.
What bulls want is to be like a rolling stone that gathers no moss.
What they do not want, is to be like a stagnant stone that gathers way more than moss.
Please take a moment to check out my upcoming book, Plant Your Money Tree: A Guide to Growing Your Wealth.
Trading levels for key stock market ETFs:
S&P 500 (SPY) – 267 is the immediate pivotal support. 270 next resistance. 265 support.
Russell 2000 (IWM) – 150 pivotal. 148 support and 152 resistance
Dow Jones Industrials (DIA) – 248.50 resistance. The 250 with support at 242
Nasdaq (QQQ) – After a new multi-month low at 157.13, it cleared 160-now pivotal with resistance at 164.50
KRE (Regional Banks) – 55.00 pivotal
SMH (Semiconductors) – 90.00 pivotal support. Resistance 93.25. Only a monthly close over 94.60 can turn this around.
IYT (Transportation) – Pivotal support at 188.75 then major at 194.
IBB (Biotechnology) – The 200 WMA at 104.75-pivotal
XRT (Retail) – 45.00 pivotal support with 47.50 resistance
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.