July 10, 2019
By Mish Schneider
Tech and Semiconductors make significant gains and hold the bullish phase.
Transportation struggles and declines into a Distribution phase.
And all of this with the backdrop of the S&P 500 and QQQs making new all-time highs, while the Russell 2000 is not even close to the recent highs, let alone new highs.
A little history into why Transportation and Semiconductors are so important to watch.
Transportation IYT, has been a invaluable economic barometer since the Charles Dow days.
Measuring how goods and services are moving via planes, ships, airplanes and trucks tells us how robust demand is.
Semiconductors SMH, give us two indicators. First, how the tech business, which the US remains the great innovator, is doing.
Secondly, as a highly speculated sector, how much money is going into tech as a sign of investor confidence.
So what does it means when one sector is going one way and the other sector is going the other way?
Here are the weekly charts on the two sectors.
The blue line is the 50 week moving average or about one year of data.
The green line is the 200 week moving average or about 4 years of data.
Even after Powell’s statements on his willingness to cut rates, IYT remained red.
Furthermore, is is well under the 50-WMA and under all MAs on the daily chart. The weekly phase is caution. The daily phase distribution.
I find it really tough to find confidence in Powell’s or any other’s statements concerning the health of the economy when IYT looks this poorly.
If earnings season disappoints, we can thank IYT for it’s role as harbinger.
Otherwise, we want to see IYT move up over 188.40-and soon!
Semiconductors is in a bullish phase on the weekly and daily charts.
That is positive, however, there is solid resistance just overhead.
So, although it’s a whole lot better than the transportation sector, SMH is telling us that there remains speculative hesitation, even in the strongest part of the economy.
With today’s statements, I am even more convinced to remain light in equities, with the exception of a few stock picks that are doing their own thing. I would change my mind if IYT springs back to life.
I still maintain a focus on commodities. Already in gold miners, the Euro and a small position in both sugar and silver, I am waiting to pounce on increasing that exposure in time.
S&P 500 (SPY) 299.66 printed a new all-time high. 295.75 pivotal support.
Russell 2000 (IWM) 154.50 is the major pivotal 50-WMA to hold. 158 resistance.
Dow (DIA) 269.88 the new all-time high. 267.45 pivotal
Nasdaq (QQQ) 193.09 the new all-time high. 189.40 support
KRE (Regional Banks) Unconfirmed bearish phase. How’d that happen? 53.66 the 200 DMA now resistance to clear.
SMH (Semiconductors) 115.70-116 resistance. Support at 111 to hold
IYT (Transportation) 188.50 key to clear again while 185.85 is the nearest point to clear.
IBB (Biotechnology) 109.50 now resistance and 105.35 support
XRT (Retail) Unconfirmed bearish phase. 42.45 pivotal area-has to close above 43.15. Support at 41.75