Who is surprised that the two sectors of the Economic Modern Family that broke over the inside week trading ranges are Semiconductors (SMH) and Biotechnology (IBB)? Also, who is surprised that the sectors that did not break over their outside week's trading ranges are everybody else?
Like a total rinse, wash, repeat, the buyers came into tech and pharma, and, although the others saw buyers in sympathy, their gains were not enough to clear last week's highs. Nor were their gains enough to clear the outside week's trading range high from 2 weeks ago.
What do we need to see now?
I am not trying to appear negative. However, this pattern of a run in NASDAQ, the S&P 500 and Tech, while the Russell 2000, Retail, Transportation and Regional Banks simultaneously struggle, is all too familiar. There's the high yield corporate buyers and then there's the "inside" of the market.
Yes, it's true the market is forward-thinking, and reacted well to a flattening of the death rate and news that OPEC will meet on Thursday. But it is also possible that this forward-thinking is too optimistic and running well ahead of itself. So, to remain totally objective, here is what has to happen.
First off, the Russell 2000 has to clear last week's high 113.15, then the outer week's high 117.60. Transportation (IYT) has to clear the outside-week high of 145.52 and hold 140.72, last week's high. Retail (XRT) has to clear last week's high of 30.43 and then the outside week's high of 31.63. Regional Banks (KRE) has to clear last week's high of 33.59 and then the outside week's high of 34.73.
As for the two areas that outperformed? Semiconductors (SMH) has to clear the 50-week moving average at 123.30 (and stay there). Biotechnology (IBB) has to hold 109.54, its 50-WMA.
The medical news has to remain on the side of a flattening curve. And the economic damage, which is palpable to most of the country, has to prove that it will be more temporary than what many fear it could be.
- S&P 500 (SPY): 258 support, 264.49 pivotal and a move near 290 (if it gets there) a short (retraced to the MA breakdown)
- Russell 2000 (IWM): 112.56 pivotal
- Dow (DIA): 225.87 pivotal
- Nasdaq (QQQ): 190 support and a move to 200 area a short
- KRE (Regional Banks): Tied to oil. 32.00 nearest pivotal area
- SMH (Semiconductors): 122 pivotal and a move to 127 a short
- IYT (Transportation): 140.52 pivotal
- IBB (Biotechnology): 112.75 resistance, 110.00 support
- XRT (Retail): Inside week - 31.63-26.29 range to watch
- Volatility Index (VXX) Inside week - 59.01-39.00 range to watch
- Junk Bonds (JNK): Inside week - 95.98 resistance, 83.18 support
- LQD (iShs iBoxx High Yield Bonds): 120 pivotal support; a move to 125.50 area a short
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
