October 4, 2018
By Mish Schneider
Our radar screen lit up today as many instruments changed phases for the worse.
Transportation (IYT), such a big focus as the one to tell us what’s next, went into an unconfirmed warning phase.
Semiconductors (SMH) went into an unconfirmed distribution phase.
That means it went straight to jail breaking down below the 50 Daily Moving Average without stopping at the 50 DMA.
Biotechnology (IBB), another unconfirmed warning phase.
Regional Banks (KRE), confirmed the Distribution phase.
Retail (XRT) is in a confirmed warning phase.
All these phase changes occurred on the Daily charts.
At times like this, it pays to look out further.
What do we see on the weekly charts?
Blame the bonds, the dollar, sluggish emerging markets, the Fed or the rising oil prices if you wish.
What matters most, is what happens on the weekly chart as every substantial correction has led to buyers buying dips.
That should change if the weekly charts deteriorate in phase.
Behold the Modern Family Weekly Chart.
Earlier in the week I pointed out that Regional Banks broke the uptrend trading below the 50-week MA (blue line).
Biotechnology, Retail, the Russell 2000 and Transportation, are still quite a bit away from their 50-WMAs.
What is concerning is Semiconductors.
Although SMH has been here before and managed to salvage itself from closing under the 50-WMA, this time could be different.
Keep 104.39 in your mind. A close below in SMH will be the first time it has closed since November 2016. That was right before the election.
Regardless of what you hear from analysts and appointed officials, that will put tech at risk.
Furthermore, with the declining phases, any bull still thinking that this is a generational bottom, will clearly have a target on their back.
On the flipside, should Friday’s close keep SMH ahead of the 50-WMA line, that keeps the bulls running slightly ahead of the hungry bear for another day to week.
A note-the photo of the sculpture I used in the Daily from 10-03-18 was created by artist Lorri Acott. Thanks Lorri! Check out her website http://www.dreambigsculpture.com/
S&P 500 (SPY) 291.00 pivotal. NFP tomorrow so watch that level if it can clear/close back above.
Russell 2000 (IWM) 164.07 now pivotal resistance with 161.00 next support if fails further
Dow (DIA) 267.60 is pivotal resistance. 265.82 pivotal support
Nasdaq (QQQ) We won’t know if this is a double top unless this breaks down under 181-so far-that was today’s low.
KRE (Regional Banks) Rallied some-and into resistance around 61.40
SMH (Semiconductors) Keep your eyes on 104.40 as the week ends
IYT (Transportation) Unconfirmed warning phase-giving it room to 202-which today it managed to hold
IBB (Biotechnology) 120 pivotal resistance now
XRT (Retail) 47.70 the 200 DMA