In the past couple of weeks, the market has shown to have higher volatility paired with scattered daily price action. With the recent discovery of yet another COVID-19 variant (lambda) and with the spread of the highly contagious delta variant, we could be seeing the market begin to rotate into its next trend. Whether that pushes the markets back into the stay-at-home mindset as states begin to change mask mandates, or if it turns into another partial lockdown, we will have to wait and see.
With that said, while certain sectors of the market look to be confused as they trade sideways, we do have 3 clear signals coming from Wednesday's price action.
Recently, we talked about the Semiconductors sector (SMH) breaking to new highs. Its ability to trend up while the general market price action wanes shows underlying strength. This continues to be the case today as SMH cleared to new highs. Additionally, the Biotech sector (IBB) surges as the Pfizer-BioNtech (BNTX) vaccine get closer to being approved by the FDA, along with the rise in delta variant cases moving Moderna (MRNA) and the general space higher. On the other hand, this is creating a negative impact on the Retail sector (XRT), which broke under its 50-day moving average at $95.21 and under recent lows of $93.79.
If the trend continues to head in this direction, we should keep our eyes on the tech sectors as the space manages to hold up, even as COVID-19 creates worry and thus puts extra stress on the brick-and-mortar retail stores.
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- S&P 500 (SPY): Watching for new highs.
- Russell 2000 (IWM): 225 resistance.
- Dow (DIA): 351 resistance area. Support 345.
- Nasdaq (QQQ): 360 support. Holding Near highs.
- KRE (Regional Banks): 60.32 support the 200-DMA 64 pivotal area to clear and hold.
- SMH (Semiconductors): New highs.
- IYT (Transportation): 245.48 next support.
- IBB (Biotechnology): 174 high to clear.
- XRT (Retail): Needs to get back over 93.79.
Assistant Director of Trading Research and Education