Rotation or Retreat? Stalled Stock Sectors Signal Potential Shift
Michele Schneider | Apr 05, 2024 01:33AM ET
Watching certain instruments for clues on next moves, probably the best (equities) to watch is the Economic Modern Family.
The Family covers everything from tech to regional banks to small caps to retail and more.
Is our economy improving?
What sectors do not like the higher for longer conversations?
Which sectors have pricing power?
Looking at these weekly charts, I drew horizontal, parallel lines to show that at these higher levels, all the Family are rangebound when you study the patterns from late February to now.
Correction can happen in price.
Corrections can also happen through time and consolidation.
I am not even sure I would call the last several weeks’ price movements a correction, but we do see that the current consolidation makes analysis of how each sector is performing and will perform a bit easier.
Furthermore, it makes patience a key factor right now.
Plus, depending on how the consolidation levels break (up and down) it is easier to then trade by following the money.
What I love about these charts is how easily we can see rotation once ranges break.
We can also keep a cool head whilst we wait for any or all these ranges to break.
Granny Retail XRT trades between 75.00-80.00. Hence, until she goes up and beyond or down and below, it is best to watch.
We are keen on this sector for the future mainly because of the diet drugs. For now, though, we are happy to sit.
Granddad Russell 2000 (IWM) has a range of 200-212. IWM looks better than Granny. While IWM continues to underperform the other indices, a range break above 212 would be compelling.
Biotechnology IBB has been stuck between 134-140 since December 2023. One thing we can say for certain-when IBB breaks its range, don’t even think about it—just follow.
The longer an instrument remains in a trading range, the bigger the move when it breaks the range.
Sister Semiconductors (SMH) consolidates between 220 and 240.
Noteworthy is that it is consolidating near the highs of the trading range and near all-time highs. That is a positive sign. Following tech and chips to the upside on a further breakout makes sense.
Transportation IYT trades between 67-71. The tightest range in the Family.
Should that break out, consider it a good sign for the US economy and evidence of a “no” landing.
Get The News You Want
Finally, Prodigal Son Regional Banks KRE, has stubbornly traded between 45-50. While many thought commercial banks would fail, the best we can say is that they are holding but not wowing.
h2 ETF Summary/h2- S&P 500 (SPY) 520 now resistance
- Russell 2000 (IWM) 201 support and then after that is 185
- Dow (DIA) 385 support 400 resistance
- Nasdaq (QQQ) 440 the pivotal area
- Regional banks (KRE) 45-50 range
- Semiconductors (SMH) 223 support near-term
- Transportation (IYT) 68 area support
- Biotechnology (IBB) 135 pivotal
- Retail (XRT) 75 pivotal
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 76.50 support and back over 77 better
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.