Monday, the article covered some of the warning signs, particularly in the Regional Banks and Transportation sectors.
We ended the article by writing this:
“Transportation and Regional Banks make up nearly 1/3 of the Economic Modern Family.”
On their weakness:
”Of course, the week is young, so we have time to see if both sectors play catch up or are sending us a meaningful warning message. Either way, they are not to be ignored.”
Apparently, they heard us. Both sectors rallied with the overall market.
We are still sticking to the trading range thesis. The max upside for the SPDR® S&P 500 (NYSE:SPY) is 420, with 400 as the pivotal area to hold.
Also, have you noticed that many commodities flew today as well?
Coffee, sugar, sugar, sugar, the Invesco DB Agriculture Fund (NYSE:DBA), and orange juice to name a few.
The Fed may not have noticed, which should have investors worried down the line. Nonetheless, let us cover the chart of the Invesco QQQ Trust (NASDAQ:QQQ)) for the good news.
Note the 2 elliptical black circles at the bottom of the chart. The one on the top line is an indicator from our Triple Pay tool, Leadership.
Currently, the QQQs are outperforming the benchmark SPY. Yet, similar to the price, there is resistance near last Friday’s price.
Growth has overtaken value for now, seemingly on the ideas that Fed will pause, and inflation has peaked. The Real Motion indicator proves to be even more fascinating.
The price chart shows the 50-daily moving average below the 200-DMA by a sizeable margin. The inference is that by the time the 50-DMa catches up (if it catches up, the rally could be at the end of its run.
Furthermore, and not surprisingly, the price level it is trading at on Tuesday is inside the trading range of Monday..
As far as the momentum, though, the RM chart illustrates a clear divergence. First, Momentum had a golden cross (50-DMA clears the 200-DMA.)
Secondly, the red-dotted line (momentum gauge) is well above both moving averages.
This means that momentum is well outpacing the price. Now, we wait for the price to confirm by closing above its 200-DMA.
Auspiciously, with FOMC Wednesday, that could happen or not happen very quickly. Is momentum telling us that the NASDAQ 100 has a new leg higher on the horizon?
We believe that inflation will eventually put the kibosh on growth stocks and, most likely, most stocks.
But for now, the math looks like that notion, for now, is discounted.
ETF Summary
- S&P 500 (NYSE:SPY): Let’s not forget the Dec highs and 400 support.
- iShares Russell 2000 ETF (NYSE:IWM): Canceled the glass ceiling-good thing 202 major resistance.
- Dow Jones Industrial Average ETF Trust (NYSE:DIA): 2 inside weeks developing-that will be interesting by Friday.
- Invesco QQQ Trust (NASDAQ:QQQ): The glass ceiling is still in place til it clears 298.26.
- S&P Regional Banking ETF (NYSE:KRE): Rallied right to the 200-DMA-if clears 64 next.
- VanEck Semiconductor ETF (NASDAQ:SMH): The glass ceiling is still in place til it clears 241.19.
- iShares Transportation Average ETF (NYSE:IYT): Nice comeback. Now must clear and close over 232.55
- iShares Biotechnology ETF (NASDAQ:IBB): Multiple timeframes count, and this failed the 23-month MA so far.
- S&P Retail ETF (NYSE:XRT): Granny wakes up and is in the lead-inflation not felt here at this point-til then, very positive.