After the quarter-percent rate increase, the market continues to rally off recent lows. Now, all the major indices besides the Nasdaq 100 (QQQ) have cleared resistance from their 50-day moving average as seen in the above chart. So far, the Russell 2000 (IWM) is leading the way with a second close over its 50-DMA. Now we can watch for the rest of the indices to follow in IWM's footsteps.
Given the recent downward trend in the market, many investors have taken a defensive investing approach, buying more commodities and precious metals. But with the current rally, ETFs such as Silver (SLV), Sugar (CANE), and Oil (USO) have taken a breather. However, they still have upside momentum and have consolidated, showing that investors are still looking for their safety.
This gives us two potential trading opportunities. While the macro-economic situation has not changed with increasing rates and inflation, we can continue to watch for trading opportunities within commodities. On the other hand, equities are also showing more potential, with many companies trending upwards on a short-term basis.
Having said that, our trading approach continues to be from a rangebound/stagflation perspective. We continue to see potential in commodities, since we expect inflation to increase along with supply chain disruptions. However, we are also looking for trades in equities as we see the short-term potential to the upside. While the market may not make new highs, we can still watch for entries based on our recent lows holding and a breakout over key resistance levels, such as the 50-DMA, in the indices.
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The question on everybody's mind right now is "Was that the bottom?" A lot of the doubt has to due to with the economy and the recent interest rate rise; however, the economy and the markets can be two very different things. On this week's edition of StockCharts TV's Mish's Market Minute, Mish examines the entire macro, looking for signs of strength or weakness. As always, Mish provides some actionable trading advice.
Mish also hosted the Friday, March 18 edition of StockCharts TV's Your Daily Five. The market has been extremely volatile, and investors are looking for bargains. Mish takes a look at a variety of sectors, and gives you an actionable trading plan on the stocks she finds interesting.
You can also watch Mish's latest appearance on Fox Business here.
- S&P 500 (SPY): 446 200-DMA to clear next.
- Russell 2000 (IWM): Needs to hold over 207.
- Dow (DIA): 350 the 200-DMA.
- Nasdaq (QQQ): 352.52 the 50-DMA.
- KRE (Regional Banks): 73.17 the 50-DMA to clear.
- SMH (Semiconductors): 271.76 50-DMA to clear.
- IYT (Transportation): Needs to hold over 260.
- IBB (Biotechnology): 130 to hold.
- XRT (Retail): 79.18 to hold.
Assistant Director of Trading Research and Education