After Wednesday's Fed announcement, the stock market has been sitting in an uneasy state. The U.S Dollar (UUP) has not only firmed, but pushed over resistance from its 200-day moving average at 24.69, confirming an accumulation phase. Additionally, the 20+ year treasury bond ETF (TLT) has run up along with the dollar, creating worry among investors that the market is slowing in pace.
However, the Nasdaq 100 (QQQ) made an inside day chart pattern which is a consolidative/pivotal chart pattern. Meanwhile, the other major indices, including the Dow Jones (DIA), Russell 2000 (IWM) and the S&P 500 (SPY), sold off through the day.
Of the 4 indices, only the QQQ is holding a bullish phase over its 50-day moving average. Come Monday, if SPY and IWM have a second close under their 50-DMA, they will confirm a cautionary phase change. This is showing a potential weakness, if only the tech-heavy index QQQ is holding when the rest of the indices are breaking lower.
Furthermore, the economy could also be shifting into something Mish has been talking about for a long time now. Stagflation. Stagflation refers to an economy that is experiencing a simultaneous increase in inflation and stagnation of economic output.
For now, we will plan to continue watching the QQQs for a further divergence from the other indices, as well as the commodities, such as precious metals and food, as these are potential hedges against an inflationary period.
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ETF Summary
- S&P 500 (SPY): Will confirm caution phase with second close under the 50-DMA at 417.33.
- Russell 2000 (IWM): Broke the 50-DMA at 224.23.
- Dow (DIA): Without near support DIA needs to hold and get back over 335.20.
- Nasdaq (QQQ): 342.80 pivotal area.
- KRE (Regional Banks): 63.38 next support area.
- SMH (Semiconductors): 244.94 the 50-DMA.
- IYT (Transportation): Needs to find support.
- IBB (Biotechnology): 154 support.
- XRT (Retail): Watching for second close under the 50-DMA at 91.80.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
