Mish's Market Minute

The Economic Modern Family Breaks Down

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Mish's "Economic Modern Family" is made from 7 keys symbols that act as a guide for the stock market macro picture. The Family consists of the small-cap Russell 2000 index (IWM), Transportation (IYT), Retail (XRT), Regional Banking (KRE), Biotech (IBB), Semiconductors (SMH) and Bitcoin (BTC).

Just about every member of the Family is within a bearish phase, meaning price is trading underneath the 50-day moving average, while the 50-DMA is under the 200-DMA, as seen in the above charts. With that said, what do we see next in the eyes of the Family and how should we prepare for the coming trading weeks?

The first thing we should be watching for, if we are expecting the downward trend to continue, is for members is to either break lower or stay below their pivotal price level. Currently, many members are near pivotal support/resistance levels, as seen by the black lines in the above chart. If these levels cannot hold and stay below them, we can watch for the next step lower across the board.

We should also be careful of fake breakdowns. These selloffs that are followed by quick reversals can trap short traders and trigger a rally. With that said, when it comes to going short, we can also watch for rallies into resistance. If more ETFs break down, watch for these black lines to act as new resistance levels once they are broken.

On the other hand, we should note that Bitcoin has a weak bearish trend.

While Bitcoin's price is under the 50-DMA and its pivotal 40k price level, notice how the major moving averages are more neutral in their slope compared to the other Family members. This shows that BTC has a stronger chance of turning around. However, traders should be cautious of the space, as BTC can easily break towards 36-34k.


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ETF Summary

  • S&P 500 (SPY): 410 support.  
  • Russell 2000 (IWM): Needs to hold 187.
  • Dow (DIA): 326 next support area.
  • Nasdaq (QQQ): 317 pivotal.
  • KRE (Regional Banks): 63.80 now minor resistance level.
  • SMH (Semiconductors): 237 new resistance.
  • IYT (Transportation): 239 support.
  • IBB (Biotechnology): 118 next support.
  • XRT (Retail): 72 pivotal.


Forrest Crist-Ruiz

MarketGauge.com

Assistant Director of Trading Research and Education

Mish Schneider
About the author: serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision. Learn More
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