Last weekend the title of the Daily was: Economic Modern Family-Warning Signs End of Week.
At the time the theory was:
“Looking at the 6 weekly charts, I updated the 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.
Depending on how the consolidation levels break (up and down) it is easier to then trade by following the money.”
The sector we were most concerned about was Granny Retail XRT. “Granny Retail XRT sits right on the bottom of the consolidation range at around 74.50.”
We were also concerned with junk bonds HYG. “Rangebound junk bonds HYG weekly chart also shows us that under 76.50 risk begins to show more risk off.”
As you can see from the updated charts, Granny Retail XRT broke the consolidation range.
HYG junk bonds broke the consolidation range.
For junk bonds, until the price returns over the low of the weekly trading range, caution is warranted.
Clearly, Biotechnology continued its downswing and has the distinction of being the first sector to break that weekly consolidation.
But what about the others?
What should we look for this week?
First let’s start with Bitcoin.
This is the month of the halving. Notice how the weekly consolidation range between 60k-72k remains intact.
That should make the next moves obvious. With a bit more patience you will see if Bitcoin will hold support and breakout above the top of the range or continue to chop within the range.
Regardless, right now there is relative strength here.
For Granny Retail XRT we first want to see her hold the 200-WMA at around 71.00. But until she makes her way back over 74.50 area, we are cautious on equities.
The Russell 2000 (IWM) Granddad generally follows Granny’s lead. Hence, under 200 we are cautious, and back above that level, friendlier.
Biotechnology IBB, already weak, now must hold its 50-WMA or around 129.
Semiconductors SMH remain strongest as one would expect. 210-240 is the current trading range. That tells us if the market is to hold, SMH will be the first to pop.
What bulls do not want to see is SMH break below the range.
Transportation IYT tests the bottom of its weekly consolidation range. Interestingly, a relatively strong Family performer, but on alert for a breakdown.
Regional Banks KRE are most interesting to me. Friday began with a lot of bank earnings. Most of the reports were solid. Nonetheless, all the banks opened lower and remained so throughout the session.
KRE is still slightly above the weekly trading range. With long bond yields a bit softer, it is possible to see this sector hold up with a very low-risk entry point against the 50-WMA.
ETF Summary
- S&P 500 (SPY) 520 now resistance 509 the 50DMA
- Russell 2000 (IWM) 200 pivotal
- Dow (DIA) Confirmed warning phase 378 support
- Nasdaq (QQQ) 437 the 50 DMA
- Regional banks (KRE) 45-50 range
- Semiconductors (SMH) Still outperforming 223 pivotal
- Transportation (IYT) 67 pivotal with 65 bigger support and now under the 50-DMA
- Biotechnology (IBB) 135 resistance 129 support
- Retail (XRT) Sliced below support and now 71-72 has to hold
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 76.50 broke so risk-off for now