Rather than comment on commodities, which I hope you read in my blog about over the weekend and saw today how well they performed relative to the overall market, I want to dedicate the Modern Family to those singing, "To All the Bulls I've Loved Before."
In case you're wondering, that title stems from Willie Nelson's "To All the Girls I've Loved Before." The song is dedicated to the bulls, whom the market loved before. Will they, like the winds of change that are always blowing, find love again?
Let's look at some potential good news, plus focus particularly on the Regional Banks ETF KRE. On January 15th, I wrote a blog called "Why Regional Banks KRE is the Prodigal Son." At the time, I observed, "For the first time since October 2019, KRE broke below the 50-daily moving average."
I went on to write, "KRE has served as a lead indicator in the past. Most noteworthy was back in October 2018, when the S&P 500 was making new all-time highs.
"KRE was the first sector to sell off. And we know what happened next - a 20% correction took out a lot of profits, not to mention quieted all the so-called "geniuses" that appear in easy bull runs.
"Under 56.00, especially on a closing basis this week, will spell trouble."
Looking at the weekly charts, KRE has literally halved in value since then.
It stands to reason that, if the Prodigal Son lives up to his reputation as the first one to signal excessive lavishness, he should be the first one to find forgiveness and bottom out.
A couple of other interesting points on the weekly charts. The Russell 2000 held last week's low. That gives us a definable support level. The same is true with Transportation (IYT), Semiconductors (SMH; also on the 200-WMA) and Granny Retail (XRT). Biotechnology held the key 95.00 level.
Looking at KRE, the ETF broke last week's low. That means that, unless it can clear and close above 29.25 to start, any rallies off of a potential tradable bottom remain suspect.
As the first one to warn us that something big was coming, it now must also tell us the worst is over.
- S&P 500 (SPY): New low today for this move - 228 now resistance to clear
- Russell 2000 (IWM): Maybe something close to triple bottoms near term. It at least has to close over 106
- Dow (DIA): New low on this move-needs to close over 192
- Nasdaq (QQQ): New low on this move - needs to close over 182 for best scenario
- KRE (Regional Banks): Let's see if this can first close over 31.00
- SMH (Semiconductors): Best shape still - looking for a close over 105.20
- IYT (Transportation) Possible double bottom near-term - needs a close over 128
- IBB (Biotechnology): 101 resistance and 92.15 recent low-95 pivotal
- XRT (Retail): Possible double-bottom near term - needs a close over 30.00
- Volatility Index (VXX): 50.00 pivotal
- Junk Bonds (JNK): New low-86.20 has to clear
- LQD (iShs iBoxx High yield Bonds): Fed buying here-still a huge piece of the puzzle-over 115 see 117 next hurdle and has to hold 111
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
