Market reaction to the onset of COVID-19 has been volatile and uncertain. Entire economies have closed, over 1 million individuals have been infected, 17 million people have filed for unemployment in the US and GDP is set to contract at the highest rate since the Great Depression.
Yet, the market is up.
What can we possibly make of all this seemingly irrational price action? And, more importantly, how can we trade all of this?
A word about Regional Banks (KRE) as a follow-up to yesterday. As I showed you in the daily and weekly charts, KRE had the 35.00 level to confirm a breakout from a base. With oil a huge concern, on top of the poor earnings that came out in the big banks, KRE did not hold 35.00. Unless KRE can take back the 35 level and hold, we could say that, despite the rally in the indices today, history does repeat itself, which means that could be an early warning the rally will weaken soon.
In a recent interview I conducted with RealVision, I took a deep look into the technicals of the wild market and revisited the famous economic modern family charts - oil, the USD, gold, broad market bottom/tops and more. While many economists are comparing this period of time to the Great Depression, I looked at the recession of 1973-1975 and the ensuing stagflation, which led to hyperinflation by the end of the decade. Plus, I go through a myriad of technical setups to watch emerge. Check it out here!
- S&P 500 (SPY): 270 support and a move near 287-290.45, if it gets there, is a short (retrace to the MA breakdown)
- Russell 2000 (IWM): 118-120 now pivotal support. 125.80 2018 November low now resistance
- Dow (DIA): 236.80 the pivotal 200-week moving average to watch. 240 resistance
- Nasdaq (QQQ): Unconfirmed bullish phase. How often have we seen this lead while the mod fam struggles?
- KRE (Regional Banks): 35.00 pivotal resistance now
- SMH (Semiconductors): Unconfirmed bullish phase but into some resistance-must hold 128
- IYT (Transportation): Lagging, which bothers me. 150 resistance 138.50 support
- IBB (Biotechnology): 115 now support with 120 next resistance
- XRT (Retail) 30 now support to hold 36; 38 big resistance
- Volatility Index (VXX): 39.50 resistance w/ the 50-DMA support at 33.35
- Junk Bonds (JNK): 101.22 the 50-DMA - should hold 99 if good
- 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
