The safest place in Tuesday's trading session was the tech sector.
The tech-heavy Nasdaq 100 (QQQ) closed a pinch up on the day, while the small-cap Russell 2000 (IWM) broke its 50-day moving average and closed -1.62% lower. Conflicting major indices does not make trading easy, as both show large portions of the overall market.
With that said, Mish's Economic Modern Family, consisting of 5 key sector ETF's and 1 index, could be signaling a weakening market picture. The members include:
- Russell 2000 (IWM) – Small cap index
- Transportation (IYT)
- Retail (XRT)
- Regional Banking (KRE)
- Biotech (IBB)
- Semiconductors (SMH)
As seen in the picture above, IWM is teetering on the edge of its 50-day moving average and could drop into a cautionary phase if it closes for 2 consecutive days underneath its major moving average. This is important because, if IWM joins both IYT and KRE under the 50-DMA, half of the Family will be in cautionary phases. Although the tech sector (SMH) has pushed to new highs, it can quickly turn around once it realizes other key sectors are not following.
On another note, the FOMC Minutes report is released Wednesday. This could give insight into when the Federal Reserve is going to cut back on its monthly bond-buying program, which has been a major supporting factor in the economy and market growth throughout the pandemic. Though the Fed has been hesitant to end the program anytime soon, it has raised worries of how much debt the economy can handle before inflation gets too hot.
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Some analysts are super bullish. Some analysts are much more cautious. In the latest edition of StockCharts TV's Mish's Market Minute, Mish walks you through the evidence of price so that you can see what transpires and what the action plan should be accordingly. The four areas of focus here are the Macroview, Outliers, Inflation/Stagflation and some stock picks to close out the show.
- S&P 500 (SPY): 427 minor support the 10-DMA.
- Russell 2000 (IWM): Watching to hold the 50-DMA at 225.77.
- Dow (DIA): Bounced off the 10-DMA at 343.54.
- Nasdaq (QQQ): Holding near highs.
- KRE (Regional Banks): Needs to get back over 63.63.
- SMH (Semiconductors): 255.94 minor support.
- IYT (Transportation): 257.67 support.
- IBB (Biotechnology): 159 support area.
- XRT (Retail): 94.25 the 50-DMA.
Assistant Director of Trading Research and Education