We have and continue to use Mish's Economic Modern Family to successfully navigate through the pandemic and now, in 2022, we use its insights to guide us through a year that has three main overhead pressures: geopolitical stress from the current Russian/Ukraine war, inflation and, finally, rising interest rates.

Last year's dip-buying was all the rage as a large portion of the market ran rich with money provided by the Fed. Now, traders are finding the market tough to navigate, with weak trends that can easily reverse. This is why we use the Modern Family for market timing.

Currently, the Family is hitting resistance areas that, if not cleared, could spell more chop and rangebound trading ahead.

The Economic Modern Family consists of:

• Russell 2000 Index (IWM)
• Transportation (IYT)
• Retail (XRT)
• Regional Banking (KRE)
• Biotech (IBB)
• Semiconductors (SMH)
• Bitcoin

Currently, IWM and IYT have resistance from prior highs in February, as seen in the above chart. Additionally, KRE and SMH need to clear resistance from either the 50- or 200-day moving average. With that said, if KRE and SMH can clear resistance, every member would be over their 50-day moving average. However, it's more likely that we will see more chop/volatility as the rest of the symbols struggle to hold or clear.  

The main takeaway is that we can see obvious levels across the Family that need to clear. If they don't, this can give us a reason to wait before looking for more trade setups.

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ETF Summary

• S&P 500 (SPY): 446 to hold.
• Russell 2000 (IWM): 209 to clear.
• Dow (DIA): 349 resistance.
• Nasdaq (QQQ): 350 to hold. The 50-DMA.
• KRE (Regional Banks): 73 to clear. The 50-DMA.
• SMH (Semiconductors): 273.61 resistance.
• IYT (Transportation): 270.60 resistance.
• IBB (Biotechnology): 128.81 support.
• XRT (Retail): 80 key resistance.

Forrest Crist-Ruiz

MarketGauge.com

Assistant Director of Trading Research and Education