Equities Market Is Flashing Warning Signs
Michele Schneider | Jan 30, 2023 11:34PM ET
Nearly every member of the Modern Family improved last week, with the Russell 2000 IWM, iShares Transportation Average ETF (NYSE:IYT), VanEck Semiconductor ETF (NASDAQ:SMH), SPDR® S&P Retail ETF (NYSE:XRT) all putting in Golden Crosses on their daily charts.
Except for S&P Regional Banking ETF (NYSE:KRE).
h2 Risk off or on During This Data-Heavy Week?/h2The performance of MarketGauge’s Trend Strength Indicator (TSI) improving across all four key indices, with Small Caps (IWM) and the Dow Jones Industrial Average ETF Trust (NYSE:DIA)) leading the bunch, points to risk-on.
However, some areas should keep investors on their toes.
The 52-week New High / New Low ratio for the Nasdaq Composite has begun to deteriorate, a clear Risk-Off indication for the short term.
And, despite the improvement in the market, the Yield Curve has continued to invert further.
Regional Banks KRE has not had a golden cross (the 50 daily moving average clears above the 200-DMA).
KRE sits atop the 50-DMA, true. Nonetheless, looking o wee bit at the weekly chart, KRE has yet to clear resistance and underperforms the rest of the family.
KRE’s momentum, according to our Real Motion Indicator, shows a bullish cross from last November. Yet the price has done nothing but decline in momentum since then.
Another member of the Economic Modern Family, Transportation, is also flashing a warning on the weekly chart.
IYT failed to clear the 50-week moving average (blue line). Also, note the slope on the 50-WMA is negative.
It is beginning to underperform the S&P 500 (NYSE:SPY), and momentum, according to Real Motion, is slipping lower.
Also interesting to observe is that the momentum moving averages had a death cross in early November.
Transportation and Regional Banks make up nearly 1/3 of the Economic Modern Family.
Of course, the week is young, so we have time to see if both sectors are playing catch up or are sending us a meaningful warning message.
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Either way, they are not to be ignored.
h2 ETF Summary/h2- S&P 500 (SPY): Resistance was met, and the price retreated 390-400 to hold.
- Russell 2000 (IWM) is More worrisome as we had a glass ceiling high. This could mean a visit to 177 if cit and clear Fri highs.
- Dow (DIA) Gentler correction, which has boded well for the industrials since December.
- Nasdaq (Invesco QQQ Trust (NASDAQ:QQQ)) Like IWM, a glass ceiling is high. 280 is not crazy to see.
- Regional banks (KRE) Keep watching to see if it holds 60, then 57.
- Semiconductors (SMH) Like IWM, QQQ could see a 5-10% decline from here.
- Transportation (IYT) Most obvious failure of the 50-week MA.
- Biotechnology (IBB) Multiple timeframes count, and this failed the 23-month MA so far.
- Retail (XRT) This sector held up better. If granny’s brethren fall tho, and XRT can make its way back to 64.
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