We have been here before. Sister Semiconductors (SMH) rocks the house, while her siblings and grandparents lag. Today, the disparity was palpable.
SMH closed up 2.71%.
The Russell 2000 IWM closed down .86%.
Regional Banks KRE closed down 3.68%.
Granny Retail fell by .51%.
In the last several years, corporate buybacks in the NASDAQ, tech and S&P 500 stocks, along with low interest rates and low taxes, explain the differences between the indices. Today, we can thank the Fed and insider buying.
The real US economy, or the "inside" of the market, reflected the issues even long before the virus. The trade war didn't help. So now, with all indices in the green except for IWM, who is right?
If we look back at the beginning of 2020, we can see how events played out. On February 19th, NASDAQ (QQQ) peaked at 237.47, a new all-time high. SPY was also at new all time highs at 339.08. IWM was at 169.18 while ATHs were made in 2018 at 173.39. Regional Banks (KRE) were even further from their ATHs, as were Retail and Transportation.
After that peak high in February, the virus hit.
So, we wonder, had the virus not occurred, would the economy have grown to include the weaker sectors? Or, was it inevitable that the virus or some other cataclysmic event would turn out to be the great equalizer?
Here we are again. FED and government stimulus, especially with debt buying, has encouraged the bulls for a repeat performance in QQQ, SPY and SMH. If KRE, IWM, XRT and IYT cannot join the fantasy island party, then once again, bulls, do not get too relaxed.
- S&P 500 (SPY): 270 support, 280 closest resistance and a move near 287-290.45, if it gets there, is a short (retrace to the MA breakdown)
- Russell 2000 (IWM): 114.55 support 118-120 pivotal. 125.80 2018 November low resistance
- Dow (DIA): 237 the pivotal 200-week moving average. 240 resistance, 227 support
- Nasdaq (QQQ): 205 support, 220 big resistance
- KRE (Regional Banks): Needs to get back over 33.10 to get interesting
- SMH (Semiconductors): Unconfirmed bullish phase; 128 support to hold
- IYT (Transportation): Really needs to clear 150 to get interesting
- IBB (Biotechnology): 115 support with 120 next resistance
- XRT (Retail): 31.00 support, 36-38 big resistance
- Volatility Index (VXX): 39.50 support. Has to close above 42.20 to get interesting
- Junk Bonds (JNK): 100.85 the 50-DMA. 97 support
- LQD (iShs iBoxx High yield Bonds): 129.10-132 range to watch break. 135 resistance
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
