Those of you who are new to the Daily have probably noticed the references to the Economic Modern Family.
Mish developed one index and five sectors as the nucleus of the Family to help you and herself see the real economy, as portrayed through a combination of cyclicals and non cyclicals. She has even gone so far as to create cartoon characters so that you could visualize the most salient sectors of the economy as a Family.
Three of the Family members are what Stanley Drukenmiller calls the "inside of the market." Over the last 3 months, those 3 instruments (Russell 2000, Retail and Transportation) have seen the lionshare of money rotation, mirroring the optimism for the economy in 2021. Meanwhile, not to be upstaged, two other members, Biotechnology and Semiconductors, are also roaring. Both have made new all-time highs. Only one member, Regional Banks has a long way to go to see its all-time high, which was made in 2018.
The latest edition to the Family is Crypto. Monday's Daily gave you some analysis.
Crypto was adopted by Granddad Russell 2000 and Granny Retail 2 years ago. They saw both his potential and his volatility and could not help but fall madly in love. But more on that in a future Daily. In the meanwhile, here is a link to find out more about the Family.
Today, we are focusing on Sister Semiconductors (SMH) once again leading the pack, along with Brother Biotechnology (IBB) breaking out from its multi-month highs.
As Covid cases spike across the country, biotechnology has gained momentum as focus turns to data from late-stage vaccine trials. In addition, Pfizer (PFE) and Moderna (MRNA) have applied for Emergency F.D.A approval of their vaccines.
Weekly Chart of IBB
While IBB has broken out from its July high of 146.53, it will need to close above to be a convincing breakout.
It should also be noted that while IBB wasn't able to close over its previous 146.53 high, it's poised on the edge of its trading range. Considering this sector is highly dependent on news to drive price movement, we might need another round to sustain a move upward.
On the other hand, Sister Semiconductors closed at all time highs as the tech sector has yet to make any sizable correction since October.
Her impressive move upwards has been fueled with large amounts of consumer buying as Granny Retail (XRT) has also made huge upward strides. With her continued trek higher, a possible outcome to watch for are supply chain disruptions. We have already seen a large amount of techware out of online stock and from Best Buy (BBY), a store which focuses mainly on tech gear.
So what could happen first? Will buyers begin to slow down from financial stress caused by the pandemic? Or will suppliers falter to keep up with demand?
- S&P 500 (SPY): New record highs
- Russell 2000 (IWM): Second day it held the 10-DMA at 180.59
- Dow (DIA): Resistance 300; 289.19 key support
- Nasdaq (QQQ): Broke resistance at 300; needs to hold.
- KRE (Regional Banks): 51.07 resistance. Support 47.22
- SMH (Semiconductors): Closed all-time highs.
- IYT (Transportation): 225.49 resistance with next support 215 if can't hold over the 10-DMA at 220.07
- IBB (Biotechnology): Sitting in support around 145 area.
- XRT (Retail): 61.40 resistance. Support the 10-DMA at 59.11
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
