Watching certain instruments for clues on next moves, probably the best (equities) to watch is the Economic Modern Family.
The Family covers everything from tech to regional banks to small caps to retail and more.
Is our economy improving?
What sectors do not like the higher for longer conversations?
Which sectors have pricing power?
Looking at these weekly charts, I drew horizontal, parallel lines to show that at these higher levels, all the Family are rangebound when you study the patterns from late February to now.
Correction can happen in price.
Corrections can also happen through time and consolidation.
I am not even sure I would call the last several weeks’ price movements a correction, but we do see that the current consolidation makes analysis of how each sector is performing and will perform a bit easier.
Furthermore, it makes patience a key factor right now.
Plus, depending on how the consolidation levels break (up and down) it is easier to then trade by following the money.
What I love about these charts is how easily we can see rotation once ranges break.
We can also keep a cool head whilst we wait for any or all these ranges to break.
Granny Retail XRT trades between 75.00-80.00. Hence, until she goes up and beyond or down and below, it is best to watch.
We are keen on this sector for the future mainly because of the diet drugs. For now, though, we are happy to sit.
Granddad Russell 2000 (IWM) has a range of 200-212. IWM looks better than Granny. While IWM continues to underperform the other indices, a range break above 212 would be compelling.
Biotechnology IBB has been stuck between 134-140 since December 2023. One thing we can say for certain-when IBB breaks its range, don’t even think about it—just follow.
The longer an instrument remains in a trading range, the bigger the move when it breaks the range.
Sister Semiconductors (SMH) consolidates between 220 and 240.
Noteworthy is that it is consolidating near the highs of the trading range and near all-time highs. That is a positive sign. Following tech and chips to the upside on a further breakout makes sense.
Transportation IYT trades between 67-71. The tightest range in the Family.
Should that break out, consider it a good sign for the US economy and evidence of a “no” landing.
Finally, Prodigal Son Regional Banks KRE, has stubbornly traded between 45-50. While many thought commercial banks would fail, the best we can say is that they are holding but not wowing.
ETF Summary
- S&P 500 (SPY) 520 now resistance
- Russell 2000 (IWM) 201 support and then after that is 185
- Dow (DIA) 385 support 400 resistance
- Nasdaq (QQQ) 440 the pivotal area
- Regional banks (KRE) 45-50 range
- Semiconductors (SMH) 223 support near-term
- Transportation (IYT) 68 area support
- Biotechnology (IBB) 135 pivotal
- Retail (XRT) 75 pivotal
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 76.50 support and back over 77 better