Let's start with the 4 major indices, the SPY, QQQ, DIA and IWM. They all sold off today, breaking yesterday's lows. Besides IWM, they are still not below their recent low from September 21st. If the indices continue lower, we should keep an eye on those pivotal points, as they could turn into support areas if the market is able to hold this area.
Watching the VXX, which can be used to determine short-term fear in the market, it too jumped up today, coming close to the high of 26.65 on September 21st. You can see how different symbols are lining up relative to their price points from the 21st.
The third thing to note is that JNK was having an inside day yesterday, while today it broke below that past 2 days lows and the 200-day moving average. This is important because we have been using this to judge the Fed's involvement in supporting high-risk companies.
We also talked about how the market could put pressure on the government to pass the next stimulus bill quickly. Note that once again Powell stated that there is only so much the Fed can do to support the market (I mean economy!). If we see a continuation of this price action, then keep a close eye on the Dems and Republicans to address the market's unstable action.
One thing that is interesting to watch right now is the commodities sector. Although gold and miners took a big hit, they may have found a floor. Gold futures at $1850 is key.
Food commodities also held up relatively well. This, once the dollar stops rising, continues to support the food-driven stagflation theory that now even economists are embracing. It is inevitable given the volatility in the US and globally.
With the market still highly dependent on the Fed, sometimes the best thing to do is wait through days like these. One money injection can turn everything around and give us a much safer short opportunity while we dally in commodities.
- S&P 500 (SPY): Its' all about 322 and, if that breaks, we'll see 310 next
- Russell 2000 (IWM): First to break the 200-DMA - 145.10
- Dow (DIA): 263 support, but first we have the 9/21 lows
- Nasdaq (QQQ): 260 key and then 233 the 200-DMA
- KRE (Regional Banks): 34.00 broke, so if cannot take that back, see 32 next
- SMH (Semiconductors): Seeing 161; next stop under 164
- IYT (Transportation): 195 support
- IBB (Biotechnology): 132 key support or it's going down to 126
- XRT (Retail): Granny caved to the pressure. 50 pivotal
- Volatility Index (VXX): 27.05 the 50-DMA
- Junk Bonds (JNK): Broke the 200-DMA - large selling there gave us a head's up.
- LQD (iShs iBoxx High-Yield Bonds): Broke the 200-D<A at 103.50
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
