In spite of no passing stimulus, mixed economic data, rising COVID cases and a wild pre-election season, for the first time since we can remember, the Economic Family is brushing off most of the negativity.
For years, we would report on the health of the family with words like "lagging," warning" and "sick." (All except Sister Semiconductors of course, who has been the wonder woman star of the whole market for years.) While NASDAQ and the SPY would make new all-time highs, the Russell 2000, Retail, Transportation, Biotech and Regional Banks would inch up or sell off, with all-time highs far off in the distance.
Until now.
The dialogue has changed as Transportation (IYT) and Granny Retail (XRT) made new all-time highs this past week. Biotechnology (IBB) did so a few weeks back.
The creation of the Economic Modern Family is based on the notion of economic cyclicals and non-cyclicals. Granddad Russell, Granny Retail and Tran are all considered to measure the "inside" of the economy. Hence, through the last many years, they told us that lots of the NASDAQ and SPY buying was due to corporate buyback, low corporate taxes and close to zero interest rates. Hardly a measure of the true economy.
So what has changed? Why, all of a sudden, is the Family leading? Is the economy heading towards a better and truer roseate future?
Logically speaking, with COVID around us, the market assumes the economy will stay open. Furthermore, the economic stats are mixed-jobless claims rising while retail sales (which had five solid months of growth, with this month's report coming in 1.9% higher) and consumer sentiment rally. Is this because the worst is behind us no matter who wins? Stimulus has become the new heroin and the search for a fix continues?
Our job is not necessarily to find these answers, but rather to watch the price movements on the charts.
Looking at the weekly charts to gain a better perspective, can Granny Retail (XRT) lead the charge to higher prices? Or will she need Granddad IWM to help gather everyone together?
IWM sold off through the week only to head back to last week's close. IYT made all-time-highs this week and is now sitting on support from 9/14/2018.
KRE continues to struggle through resistance at $40-41. In recent weeks, it has rallied only to stall back in its $35 to 40 range. For now, it looks to be standing its ground and maybe, with some more attempts, can finally break through.
IBB looks to have gotten into some trouble, as it failed to break through its recent high of 146.53. This one is heavily influenced by the news and could see some more pickup, since many companies are going through late stage COVID-19 vaccine trials.
Along with IWM, Sister Semiconductors is hanging in there. The family is strong for now, but, like everyone else, looks as though it's waiting for its stimulus check.
In this week's episode of StockCharts TV's Mish's Market Minute, Mish covers a macro view of topics, starting with the Major Indices Modern Family and working her way through commodities, energy and financials. While the outliers are showing interesting signals, Mish is very encouraged by the commodities sector performing as she has been predicting.
- S&P 500 (SPY): Still needs a move back over 350
- Russell 2000 (IWM): 158 support. Needs to clear 164
- Dow (DIA): 285 pivotal. Resistance 290
- Nasdaq (QQQ): 290 pivotal
- KRE (Regional Banks): Holding for now. Resistance at $40-41
- SMH (Semiconductors): 185-to-190 range
- IYT (Transportation): Sitting on support from 9/14 2018. Let's see if it can hold
- IBB (Biotechnology): Sold off and now watching to hold 138
- XRT (Retail): New all time high closed on intraday low. Caution on yesterday's low of 53.27
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
