Following up on the Biotechnology IBB sector, it failed the low price from two weeks ago (109.70) until headlines (below) hit the tape. Furthermore, four of the Modern Family members have broken a monthly moving average that has held since 2011. Incidentally, Semiconductors and Biotechnology are both well above their 80-month MAs.
The market gained because of what? A proposed payroll tax cut? Highly doubtful that that stimulates the economy. I also read that it could cost $800 billion, or 100 times the cost of the money the government allocated to deal with the virus in the states.
Furthermore, with hints of the government bailing out the shale companies, cruise lines, airlines and rental car companies, I cannot help but wonder who really believes that will resolve the oil and health crises?
What about the impending mortgage and bank crises? How else can we incentivize corporations to buy back their own stocks? After all, the Fed cut did nothing.
Yet, as we know, it's all about the stock market. Like Instagram, it's image over substance.
Anyway, with the hope and greed factors in play, I am trying to remain less gloomy and more objective while looking at price. After all, price always rules. But where would I put my money?
The monthly chart breakdowns are disconcerting for sure. Plus, the indices that trade below their weekly lows from 2-weeks ago will not impress technically, until we see a weekly (not daily) close back above those levels. Levels, by the way, are all noted in the ETF part of the commentary.
But what has held and could complete the "flation" part of the stagflation scenario?
Soft and agricultural commodities.
Let's take an example - the DBA Invesco Agricultural Fund:
The 2019 low was 14.62. The 2020 low from yesterday is 14.65. That could be an auspicious double bottom. It also could be the start of what we are already seeing from the human "psyche," like the hoarding of toilet paper: the rising awareness that, if food production and distribution begin to seriously falter, raw material prices will skyrocket.
- S&P 500 (SPY): 285.54 the low from 2-weeks-ago resistance. Then 290.25. 273 closest support held today
- Russell 2000 (IWM): 140.00 resistance with support at 127.75
- Dow (DIA): 247 pivotal resistance, 236.00 the 200-WMA support
- Nasdaq (QQQ): 199.37 the 200-DMA pivotal, 185 underlying support
- KRE (Regional Banks): Inside day. 35 support, 44 overhead resistance
- SMH (Semiconductors): 125.34 pivotal
- IYT (Transportation) 155.24 the resistance or 2018 low. 144.50 then 139 support
- IBB (Biotechnology) 109.70 pivotal, 113 resistance to clear
- XRT (Retail) 39.16 resistance, 36.00-36.90 support
- Volatility Index (VXX) 43 resistance, 35 pivotal
- Junk Bonds (JNK) 104.78 overhead gap to fill
Director of Trading Research and Education