Despite worry of a pending market correction, talks of stimulus and an infrastructure package paired with a supportive Federal Reserve helped boost market morale this week. However, specific sectors which suffered are now looking to make a comeback and, with correct positioning, anyone can jump on the trend train.
From a charting perspective, the market is optimistic for the future. This can be seen in the Economic Modern Family which shows one index and five key sectors that make up the overall market. All are in a bullish phase, meaning the price is over the 50-day moving average and the 50-DMA is over the 200-DMA.
This week's winners are the Transportation sector (IYT) and the Regional Banking sector (KRE), as they are the only ones to end the week positive. These two also happen to represent the sectors that have great upside potential. IYT stands to benefit with from the continuation of vaccine rollouts across the U.S. Many people are tired/restless from being kept inside or in one place. Myself included!
As travel becomes safer, it is only natural for money to flow back into the transportation area. A portion of IYT's holdings is in airline companies that have suffered major losses. Stimulus has helped cut some of those losses and now, with hope of more travel, some of those stocks look ripe. For example, Delta Airlines (DAL) was trading $50-60 pre-pandemic, and is now sitting at $46.
The Regional Banks ETF (KRE) also has room to grow, as it has only recently broken over its highs from early 2020 at around $59. With low interest rates, people have an enormous amount of buying and borrowing power. A couple of interesting banks that have more room to grow are M&T Bank (MTB) and Well Fargo (WFC).
Moving on to the other Family members, we have Granddad Russell 2000 (IWM), Granny Retail (XRT), Brother Biotech (IBB) and Sister Semiconductors (SMH). IWM sits under the 10-DMA at 225.37; its high is around $230 and the support sits at 217-222. Granny XRT sits in the same boat with her husband, right between support at 75 and resistance at 81.46. If both continue trading sideways, some consolidation might not be so bad.
Moving on, the biotech space has drifted closer to main support at 159.82, the 50-DMA. Additionally, IBB has stayed in line with the major uptrend, which is important as it represents new research and the state of vaccine rollouts.
Semiconductors have gone through an interesting state, as demand for supplies have increased not only from the work and home trends, but also from the increase in innovative technology, including blockchain.
Speaking of all things Blockchain - in this week's edition of StockCharts TV's Mish's Market Minute, Mish takes you through an exciting new ETF (BLCN), examining the top 25 holdings. She also discusses some of the top companies related to blockchain technology with actionable advice.
- S&P 500 (SPY): 385 support. 394 resistance
- Russell 2000 (IWM): 230 resistance. 217-222 support area
- Dow (DIA): 312 support area
- Nasdaq (QQQ): Needs to hold over 329.50
- KRE (Regional Banks): New highs
- SMH (Semiconductors): 246 support. 258.60 resistance
- IYT (Transportation): All-time highs. 224.27 support the 50-DMA
- IBB (Biotechnology): Support the 50-DMA at 159.82
- XRT (Retail): Needs to clear 81.46. 75.28 support
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
