On Monday, the Daily reported some of the red flags, particularly in the regional banking and transportation sectors. We ended the Daily by writing: “Transportation and regional banks make up almost 1/3 of the Economic Modern Family.”
On their weakness: “Obviously the week is young so we have time to see if both sectors are catching up or give us a meaningful alert. Either way they are not to be ignored.”
Apparently they heard us. Both sectors rallied with the overall market. We still stick to the trading range thesis – the maximum upside potential for the SPY is 420, with 400 being the crucial area to hold.
Did you also notice that a lot of goods flew today too? Coffee ($COFFEE), Sugar ($SUGAR), Lumber ($LUMBER), Wheat ($WHEAT), Invesco DB Agricultural ETF (DBA) and Orange Juice to name a few. The Fed may not have noticed, and that should worry investors across the board.
Still, for the good news, let’s cover the Invesco QQQ Trust (QQQ) chart (see chart above). Note the two elliptical black circles at the bottom of the chart. The one on the top line is an indicator of ours Triple pay tool, leadership. Currently, the QQQs are outperforming the benchmark SPY. However, similar to the price, there is resistance near last Friday’s price. Growth has overtaken value for now, seemingly on the notion that the Fed will pause and inflation has peaked.
The real motion display turns out to be even more fascinating. The price chart shows the 50 days moving average (MA) well below the 200-day MA. The conclusion is that by the time the 50-day MA catches up (if it catches up), the rally could be at the end of its run. Additionally, and not surprisingly, the price level it was trading at on Tuesday is within Monday’s trading range.
However, in terms of momentum, the RM chart shows a clear divergence. First off, momentum had a gold cross (50-day MA clearing the 200-day MA). Second, the red dotted line (momentum indicator) is well above both moving averages. This means that momentum is significantly outperforming price. Now we wait for the price to confirm by closing above its 200-day ma.
Fortunately, that may or may not happen very quickly on FOMC Wednesday. MarketGauge’s Nasdaq 100 All-Stars trading model now has over 40% position gains. Tuesday evening, before the start of the new month, this model will rank the strongest stocks on NASDAQ. Promising again ahead of the FOMC.
Does Momentum Tell Us the NASDAQ 100 Has a New Leg Higher on the Horizon? We believe that inflation will eventually wipe out growth stocks and most likely most stocks. But for now, the math looks like that term has been discounted for now.
For more detailed trading information on our blended models, tools and trader education courses, please contact us Rob Quinnour Chief Strategy Consultant to learn more.
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Kristin and Mish discuss whether or not the market has run out of good news in this appearance on Cheddar TV.
Harry Melandri and Mish discuss inflation, the Federal Reserve and any spark plugs that might ignite on Real Seeing.
Jon and Mish discuss how the market (still range bound) is betting on a dovish Fed in this appearance on BNN Bloomberg.
Mish discusses the price and what indices need to do now in this gig Make money with Charles Payne.
In this appearance on TheStreet.comMish and JD Durkin discuss the latest market earnings, data, inflation, the Fed and where to put your money.
In this appearance on CMC Markets, Mish delves into her favorite commodities trades for the week and gives her technical take on trading opportunities for gold, oil, copper, silver and sugar.
- S&P 500 (SPY): Let’s not forget December highs and 400 support.
- Russell 2000 (IWM): The glass ceiling lifted – it’s a good thing that 202 is putting up a lot of resistance.
- Dow (DIA): 2 weeks of development – this will be interesting until Friday.
- Nasdaq (QQQ): The glass ceiling is still there until it clears 298.26.
- Regional Banks (KRE): Rebounded straight to the 200-DMA – if he clears 64 next.
- Semiconductor (SMH): The glass ceiling is still in place until it clears on 241.19.
- Transport (IYT): Nice comeback – now needs to clear above 232.55 and close.
- Biotechnology (IBB): Multiple timeframes count and this has not passed the 23-month MA so far.
- Retail (XRT): Grandma wakes up and is in the lead – inflation has not yet been felt here, so far very positive.
Misch Schneider
MarketGauge.com
Director of Trade Research and Education
Misch Schneider serves as director of trading education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and training to thousands of individuals, major financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial professionals to follow on Twitter. In 2018, Mish was the winner of Top Stock Pick of the year for RealVision.
