After the Fed announcement that they will be buying corporate bonds, the market took off.
As mentioned in the weekend daily, we must go back to the stick in the mud, i.e. the NASDAQ 100 and its island top. Until the price trades up to 244.51 or the island gap low, today's move is on the suspect list.
The Fed did what they promised. According to an analyst at UBS, "We view this largely as the Fed following through on their promise to start ETF and individual bond secondary market purchase. A marginal positive for those that doubted the Fed would go ahead, but not much new. Definitely not a game changer."
Is that sustainable? The Economic Modern family is always my vision of reason.
The Russell 2000 (IWM) remains below both the 50- and 200-week moving averages. The black line is a line-in-the-sand pivotal point.
Granny Retail (XRT) sits on the 50-WMA but under the 200-WMA and is in a weekly bearish phase (like IWM).
Biotechnology (IBB) held the 50-DMA and now has to hold 126. On the weekly, we see the pivotal black line top o' the channel. IBB is in a bullish phase.
Regional Banks (KRE) still looks weak. It is in a bearish phase, under 40.00 - a pivotal point. Good one to watch, as always.
Transportation (IYT) also sits in a weekly bearish phase and sits on the pivotal black line.
Semiconductors (SMH) remain inside last week's trading range. In fact, they have 2 inside weeks as of today. That makes it pretty simple; under 139.75 is trouble, over 155, off she goes. And yes, SMH is in a bullish phase.
Bottom line: 4 of the 6 members are in bearish weekly phases. The "inside" of the market are all in bearish phases. The money is going into tech and pharma. Unless it goes into retail small caps and transportation, I cannot get overly comfortable long.
What I do see are yields low, dollar declining and gold holding. For now, I'm positioning for safety first.
- S&P 500 (SPY): 200-DMA at 300 - now pivotal. 312.50 resistance
- Russell 2000 (IWM): 142 resistance with support at 130, the 50-DMA
- Dow (DIA): A move over 263.35 clears the 200-DMA
- Nasdaq (QQQ): Island top - rare - will most likely confirm unless trades to 244.51. Support 220
- KRE (Regional Banks): 41.45 resistance, support at 36.15
- SMH (Semiconductors): Inside week - so there's that. 139.78 last week's low - 150 resistance
- IYT (Transportation): 158 support to hold or then see 150. 168 resistance
- IBB (Biotechnology): Tested and held the 50-DMA. 126 key support, 132 resistance
- XRT (Retail): Landed right on the 200-DMA, so 40.50 held and must keep holding
- Volatility Index (VXX): 34.50 support
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
