Economic Modern Family – Is the Music Over?

Yesterday, we heard a discordant orchestra. Today, the crescendo that had built up in NASDAQ turned into decrescendo. And while NASDAQ sold off hard, the rat-a-tat of the Russell 2000, Retail, Regional Banks and Granny Retail sectors from yesterday, sounded more like cymbal crashing today.

However, this level of volatility is nothing new. Earlier in the week I wrote, The Market Will Not Go Down Unless..

  • The death rate from COVID-19 spikes – not simply the number of cases.
  • The dollar keeps failing while the yuan grows in demand.
  • Civil unrest surges to the point of riots, hence unavoidable disruption.
  • War breaks out in North Korea or Middle East.

Cases are spiking, but so far, not the death rate. The dollar rose a bit. Civil unrest remains, but under control. And, thus far, no warmongering appears on the horizon.

So, while the orchestra of the market played its discordant notes in unison, does this mean the market has topped? This is when I like to look at the weekly charts to gain some perspective.

  • Retail (XRT) still sits above the 50-week moving average and the 200-DMA.
  • The Russell 2000 (IWM) is under both the 50 and 200-WMAs, but is having an inside week thus far (inside last week’s trading range).
  • Biotechnology (IBB) sits on the breakout level or around 136.
  • Regional Banks (KRE) is also having an inside week – and after testing its 50-DMA intraday, closed above it, keeping the recuperation phase alive. 
  • Transportation (IYT) is also having an inside week, as well as our sister Semiconductors (SMH). 

If we take a further probe into our strongest sector, SMH, going back through 152 hits a sweeter note. And if we take a further probe into the weakest sector, KRE, a hold around 37.00 and clearing back over 38.70 would also keep the music alive.

Here’s my Wall Street Multimedia, Inc. Interview from 06-23-20. Great Overview!

Also, watch today’s edition of StockCharts TV’s Your Daily Five, where I discuss the “Stagflation Scenario.” A 9 minute listen:

  • S&P 500 (SPY): 302 held, 308.50 resistance
  • Russell 2000 (IWM): 140-141 now resistance and 133.52 the 50-DMA
  • Dow (DIA): 249 the support and 260 resistance
  • Nasdaq (QQQ): Classic reversal top now, but still holding support at 242.25
  • KRE (Regional Banks): 37.00 major support held – and it has to. 39 resistance
  • SMH (Semiconductors): Inside weeks – 139.78 last week’s low; 155 resistance, 152 pivotal
  • IYT (Transportation): 161 resistance, 153 support
  • IBB (Biotechnology): 136 support, then 134
  • XRT (Retail): 200-DMA; 40.50 support holding 43.50 resistance
  • Volatility Index (VXX): 34.50-38.50 range
  • Junk Bonds (JNK): 100 big support
  • LQD (iShs iBoxx High-Yield Bonds): 130.54 seems inevitable

Mish Schneider

Director of Trading Research and Education