Keep an Eye on Retail Stocks, Small Caps for Clues on Next Market Direction
Michele Schneider | Apr 22, 2024 03:09AM ET
For consistency’s sake, this is the 3rd weekend in a row I am showing you the weekly charts of the Economic Modern Family.
3 weeks ago, it was our very own Granny Retail XRT that gave us the head’s up a correction was imminent.
Brother Biotechnology IBB flashed a warning that week as well.
By week 2, Granny confirmed, our Brother confirmed, followed by Granddad Russell 2000.
When key members of the Family break weekly channel support they had held for several to multiple weeks, the others typically follow.
And so, this past week, Transportation IYT and our Wondrous Sister Semiconductors SMH failed their weekly channel support, making the caution almost unanimous.
Almost.
One interesting holdout and in fact, reversal in that the price closed higher this past week than the week prior, is our good old Prodigal Son Regional Banks KRE.
We can speculate why-but the nature of this blog is price rules and fundamentals will catch up thereafter.
What we do know is KRE, a weak link to the chain up to this point, should the reversal confirm this coming week, could be our new superhero.
And of course, KRE is aptly named Prodigal Son-for this very reason.
Then there is Bitcoin.
With the flush this past Friday's early morning post-missile strike news in Iran, followed by the ensuing pop in price, we can see that Bitcoin is holding the weekly channel support line that goes back now to early March.
This weekend marks the halving event where the block subsidy reward for miners gets reduced from 6.25 BTC to 3.125 BTC per block, potentially impacting the cryptocurrency’s price and mining operations.
Bitcoin halvings occur automatically every 210,000 blocks or approximately every four years.
What we have learned these past weeks is that Bitcoin is susceptible to downturns in a high-interest rate environment.
And we learned that in the current time of great geopolitical stress, Bitcoin sells off.
However, perhaps because of this weekend’s halving event, Bitcoin reigns as the strongest member of the Economic Modern Family.
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Should Bitcoin hold 60,000 and rally through 72,000, pay attention.
Getting back to the rest of the Family, weekly channels may have failed in 5 of the 7 members, so now we turn our attention to weekly moving averages and phases.
Granny Retail closed the week below the 200-week moving average.
That puts the weekly phase back to recovery from accumulation. This must confirm however this coming week.
Hence, 71.00 becomes pivotal. Plus, if XRT fails to take back that level, we are looking at the 50-week moving average next at 66.45.
The same is true with the Russell 200. IWM closed right on its 200-WMA.
That tells us both IWM and XRT are key to watch this week for the next market moves.
Biotech is back in a bearish phase on the weekly charts.
While we are looking at some oversold conditions and support around current levels, unless IBB clears back over 129, we see weakness continuing.
While Semiconductors and Transportation are still above their weekly moving averages and in bullish phases, the fate of both most likely rests on whether Granny and Gramps can reverse course.
Circling back to Regional Banks KRE, we expect any upturn in the rest of the Family will only embolden this sector to rally more.
Any downturn in the Family from here, will bring KRE back to test both its weekly channel bottoms support and the 50-WMA at around 45.00.
Finally, sort of like the captain of the ship if we were to put the family on a cruise, is Junk Bonds or HYG.
Once HYG broke its weekly channel line support, that sealed the fate for a market correction.
Why?
High-yield debt on poor-performing companies is attractive when risk is ON.
Now, HYG is testing a new area of support or the 50-week moving average.
Should HYG bounce from here, along with what we see in Transportation, Regional Banks, the Russell 2000, and Semiconductors, all on support, most like good news for everyone!
Should HYG fail the 50-WMA this coming week, caveat emptor.
h2 ETF Summary/h2- S&P 500 (SPY) 480 should be bottom line support but a move over 500 could give a bounce
- Russell 2000 (IWM) 192 support
- Dow (DIA) 372 the January low
- Nasdaq (QQQ) 411 the January 6-month calendar range low and support
- Regional banks (KRE) 45-50 range
- Semiconductors (SMH) 204 now resistance with support at 175
- Transportation (IYT) 67 pivotal with 65 bigger support
- Biotechnology (IBB) 128 pivotal 123 support
- Retail (XRT) 67.00 support with 71.50 resistance to clear
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 75.50 the 200 DMA-through 76.50 relief!
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