Is the stock market looking for temporary relief?
The Russell 2000 (IWM) closed in its last 3 trading days, making a small breakout of a consolidation zone that also held above its 10-day moving average at $181.38.
Additionally, many members of Mish’s modern economic family follow the same pattern as shown in the chart above.
So far, the weakest member of the family is ETF Biotech (IBB) which is trying to hold on to its 10-DMA.
However, if the rest of the members retain their recent 10-DMA support, does this show a turning point for the market, or do we have more downside ahead?
There is no doubt that the stock market is fundamentally in a tough spot with rising interest rates, inflation, and a downtrend on the technical side.
As traders look for clues for upward or downward price action, we continue to expect the market to continue to move within a range.
That said, to focus on the near-term market picture, let’s not forget the High Yield Corporate Bonds ETF (JNK) which helps us look for direction confirmation.
So far, we’ve talked about a similar model in our modern family, which gives us a quick look at market developments in key sectors.
Notice how JNK rallied to the sectors but was successful while other family members in the chart above are recovering from their highs from the previous day.
We can now look for divergence in the price action if the family members continue to rise while JNK breaks down.
On the other hand, if JNK rallies, we could see the market take another step forward.
Summary of trading ETFs:
S&P 500 (SPY) 402 must hold. 424 50-DMA to erase.
Russell 2000 (IWM) 191 50-DMA to erase.
Dow Jones Industrials (DIA) 323 support area.
Nasdaq (QQQ) 326 50-DMA to erase.
KRE (Regional banks) Look to hold more than 64.58 on 50-DMA.
SMH (Semiconductors) 243.40 the 50-DMA to remember.
IYT (Transportation) 227.36 support area. I would like to see this hold more than 235.
IBB (Biotechnology) Flirt with 10-DMA at 116.02.
XRT (retail) Must now keep 10-DMA at 64.
The author may have a position in the titles mentioned at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.