The Economic Modern Family is holding onto the uncertainty of the election, with potential gridlock if Biden is elected and the Senate majority stays republican. As such, certain sectors of the modern family did very well, while others not so much.
Anticipating that taxes will not increase and interest rates will stay low, the Family's traditional superstar, Sister Semiconductors (SMH), not only made new all time highs, but had the largest percentage gain week to week. Meanwhile, in stark contrast, Regional Banks (KRE) eked out a small gain. One could say that the difference between two siblings in the Family reflects the differences we are seeing as a country, both economically and politically.
Sister Semiconductors, although a cyclical, has benefited from the speculative interest from investors. Growth has prevailed over value, but, as we know, semiconductors are a part of the economy but do not represent the true economy.
That is where Regional Banks (KRE), the Prodigal Son, comes in. The regional banks more accurately measure the pulse of the money that is being borrowed and spent in the rural communities of the United States. These banks also have relationships in oil and gas, a mainstay in many rural economies. We could say that is because of the pandemic, as tech has prospered with the stay at home environment, while oil and gas has taken the biggest hit.
So what does the rest of the Economic Family tell us?
Looking at the weekly chart of Grandad Russell (IWM) and layering in the election opening range where we buy over the weekly high and sell under the weekly low, Gramps over 165.71 should send prices higher and a move under 153.67 should send prices lower.
The challenging part of this, is what we do in the middle of that wide range. Trade stocks in the IWM basket cautiously!
In the transportation sector (IYT), we have a much more compelling opportunity, as not only can we use the election range breakout, but it also had an inside trading week, trading inside the week before. Therefore, this might be the best place to focus on, as a move above 207.30 should be bullish, while a move below 195.87 should be bearish.
Not as clean as IYT, Granny Retail (XRT) also could be setting up with a buy over 54.24 and short under 50.
The trading range of Big Brother Biotechnology (IBB) has greatly impacted earnings and headlines, which makes it much more difficult to navigate.
Putting it all together, any level of optimism should bring buyers to our "inside" market sectors IWM, IYT, XRT. Conversely, should the market turn over, SMH sticks out as the overvalued sector, once again.
- S&P 500 (SPY): Resistance to clear at 352. Support 346
- Russell 2000 (IWM): Watching for a break over the range from Nov. 2 to Nov. 6. Support 158.50
- Dow (DIA): Resistance from October high 297.46. 290 support.
- Nasdaq (QQQ): Held over 50-DMA, with next resistance at 297 October high
- KRE (Regional Banks): Gap to fill 43.01. Held the 10-DMA as possible support for Monday
- SMH (Semiconductors): Another new all time high
- IYT (Transportation): Confirmed bullish phase change over 50-DMA
- IBB (Biotechnology): Support 135.51 the 50-DMA
- XRT (Retail): 52 support, 55.26 resistance
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
