Is September scaring you enough?
After all, the month started out shaky and ended the first week worse than it began.
Does this mean we are headed for a much bigger fall?
Some analysts are saying that we can expect weakness and chop until the election.
When we examine the weekly charts, we see a return to August lows possible.
We see a return to May lows as a gift.
We will go through the whole family, and to mix it up a little, begin with Bitcoin.
Remember, Crypto is our Family’s “tween” and is currently acting like one.
Note that this fall to the 50-week moving average, which could be the support level to bounce from.
Our Real Motion Indicator is approaching oversold. Where would we think the worst is over?
On a weekly basis, we want to see Bitcoin have a bullish momentum divergence (red dots clear back over the 50-WMA-blue line) and,
We want to see the price close out next week back above 58,200.
Here are the weekly charts of the rest of the Economic Modern Family.
You can see why I say the August lows could be the bottom of this correction.
You can also see that if Transportation IYT or Retail XRT fail their key 50-WMA (blue), then the May lows become interesting.
Focusing on the small caps, IWM, the weekly moving averages are sitting right at the August lows.
THIS IS KEY.
I feel strongly that unless IWM can get back over 215, any move closer to 200 is a buy opportunity.
Retail (Granny) XRT, had a rough week.
However, that too is looking at the August low and maintaining the 50-WMA as support.
Plus, should XRT crawl back over 74.00, we might not see a big rally, but at least we can feel better that the worst is over.
Bulls want to see IYT hold above its 50-WMA. Otherwise, we believe IYT can get closer to the 200-WMA, but it will not fail it again.
Moving on to Semiconductors SMH, I have said repeatedly that this sector topped out.
Now, SMH becomes integral not for its leadership role, but for its ability or inability to hold up over the 50-WMA.
If SMH breaks that and the August low, we will continue to raise even more cash and add to our long bond position.
We do not need SMH to rally, but we do need the chip sector to tread water.
Biotechnology IBB hasn’t failed anything too significant as far as chart support.
Yes, IBB could not get past 150. However, we think a move closer to 135-137 is another buy point.
Regional Banks KRE has huge support around 52.00.
Given the trading range KRE sat in for nearly a year, this move lower feels more like basic long liquidation in a market correction than a commercial bank disaster on the horizon.
If you put this all together, essentially our view is that this correction is yes, seasonal, no, not end of days, and yes, a buy opportunity
UNLESS
Semiconductors have some black swan event.
ETF Summary
(Pivotal means short-term bullish above that level and bearish below)
S&P 500 (SPY) 5400-support level
Russell 2000 (IWM) 210 pivotal
Dow (DIA) 400 support
Nasdaq (QQQ) 430-440 level should hold
Regional banks (KRE) 54 support
Semiconductors (SMH) 207 the 50-WMA
Transportation (IYT) Has to hold above 65
Biotechnology (IBB) 137 area support
Retail (XRT) 73.50 pivotal
iShares iBoxx Hi Yd Cor Bond ETF (HYG) End of the uptrend? Not enough data yet but very possible