Using Stock Market ETFs As U.S. Centric Indicators

Last week I wrote about biotechnology stocks, sector rotation, lithium and electric vehicles (EVs), plus, the raw material demand from electricity usage.

Biotechnology (I will discuss more later), disappointed investors. 

Sector Rotation happened, but only to a degree. 

Lithium sank, and EVs were mixed with Tesla the winner, but not really.

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As far as raw material demand, we saw pockets of support, but nothing glaring as far as commodities.

We will mention that gold consolidated, copper might be beginning to bounce, sugar cleared resistance, oil is over $81 a barrel and platinum could be ready to roar.

We will examine that more in the coming weeks.

With PCE a bit softer, GDP basically unchanged and the first round of debates done with, it is time to reexamine our Economic Modern Family.

The Family helps us see what trends are continuing, emerging or ending and why.

stock market etfs trading analysis investing chart june review 2024

First off, the Retail sector ETF (XRT) keeps the Family and the economists concerned. 

With some dismal earnings from Nike and Levi Strauss, XRT sits once again, as it did 2 weeks ago, on the bottom of the weekly channel line.

Hence, once again, we need to watch the consumer for signs of further fatigue. And from there, how the narrative might shift. 

Currently, this sector does not have much faith in sustaining disinflation nor much faith in the Fed coming to the rescue.

The Russell 2000 ETF (IWM) saw money flow and yet just marginally held onto the pivotal 202 level. 

This will be a key index to watch this week for follow through, and that would make the retail sector feel better as the US economy might fare better.

The Biotechnology sector ETF (IBB) failed to clear the top of the weekly channel line AND closed beneath the 200-week moving average.

IBB is back to rangebound.


As for the rest of the ETF Family, the Regional Banks (KRE) did the best!

But of course. That is why we named it the Prodigal Son. 

Now, we watch for the top of the weekly channel line to clear or not.

The message here is that commercial banks are not hurting as badly, and for right now, do not pose a threat to the US economy.

The Transportation sector ETF (IYT) was the clutch Family member after the FedEx earnings showed solid projections for 2025.

Headwinds remain, however. 

IYT must clear the bottom of the weekly channel line or the 67 level. 

As Transportation connects goods and services to markets, it is a key driver of growth. 

We can see from these areas a potential pattern. 

The banks can help small caps. Small caps can help retail.

And all if help transportation rally higher, well-then we can assume rate cuts are on the table, or maybe a soft landing is achievable, or at least, some hope for a better US economy is coming the second half of 2024.

And finally:

stock market inflows investors buyiing stocks june chart year 2024

The Semiconductors sector ETF (SMH) and the tech funds saw the largest weekly inflow EVER!

This happened of course, while the chart shows SMH with a potential exhaustion top.

This past week, SMH closed below the low of 2 weeks ago.

That is a technical confirmed topping pattern that could yield a drop in this sector to a price closer to 230.

While that is not guaranteed, the bigger takeaway is that the public does not see a top in sight and is buying at what could be record highs, (at least for a while).

Overall, sector rotation into the “inside sectors” has at least reared its head.

We want to see more.

Twitter: @marketminute

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.