A Secret Setup Created by the Start of the New Year!

All the major indices closed with an inside day, meaning that today’s price range fits completely inside the prior days price range. This can be seen in the above 4 charts.

Monday also brought us a new calendar range, as it was the first trading day of the new year. This makes for a perfect setup with an inside day pattern, as we now have a good parameter to base bullish or cautious bias going forward into this month.

For example, if the Russell 2000 (IWM) is trading over Monday’s high of 197.89, that would be short-term bullish. However, if it were trading under the low at 190.94, that would heed caution.

Yesterday, we talked about the transportation sector (IYT) potentially giving us a warning signal if it confirmed 2 days under its 50-day moving average, yet today IYT made a strong comeback with the rest of the market. Because transportation plays such a key role in the economy, watching to see if it gets back over 223.18 looks to be its next important resistance point before new highs.

Going from supply to demand, the retail sector (XRT) broke over yesterday’s high of 64.68, bringing it close to new all-time highs just over 65.69. That’s clearly a positive.

Now that we are looking at the one-day calendar range with the gift of the inside day, we will next watch the 6- month calendar range. That will take effect week 3. At that point, frothy or not, the market will reveal its more intermediate- to longer-term bias.

  • S&P 500 (SPY): Inside day. Needs to clear 375.45
  • Russell 2000 (IWM): 197.89 to clear
  • Dow (DIA): 306.66 to clear with 297.42 support
  • Nasdaq (QQQ): 303.60 support. 315.29 to clear
  • KRE (Regional Banks): 52.61 resistance to clear the 200-week moving average
  • SMH (Semiconductors): 225.00 resistance
  • IYT (Transportation): Support 215. 223.18 resistance
  • IBB (Biotechnology): Inside day. 148.50 support
  • XRT (Retail): 61.91 support. 65.59 resistance

Mish Schneider


Director of Trading Research and Education

Forrest Crist-Ruiz


Assistant Director of Trading Research and Education