A Market That Roasts Red and Green

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Chile Peppers roasting in a slow-turning drum over high heat.

It’s chile season in the Southwest. Tuesday we saw Uncle Sam standing tall over Hatch, New Mexico holding a green chile in one hand with a much larger and hotter red chile by his side.

After Monday’s engulfing bullish pattern (BEP) in Biotechnology (IBB) which has neither confirmed nor failed since, both red and green chilies are wafting their distinctive aromas through the air.

Tuesday, IBB had an inside day (traded inside the range of the big BEP) and held the 200 DMA. Wednesday, IBB broke out of the trading range yet could not hold the rally. Ultimately, IBB closed green and in an unconfirmed bullish phase.

However, it has yet to make a full decision on whether it chooses to spice itself with a milder green or a more robust red.

As one who has roasted a fair share of both green and red chilies this season, I can tell you that the color does not always denote the level of hotness.  Red is not always hot. Green is not always mild.

Just ask the Modern Family. The market served them up both red and green right off the slow-turning drum.

The Russell 2000 (IWM), began the day reaching for the milder green chile. As Gramps continued to masticate, the green got a bit hotter. With an inside trading range and by the end of the day, IWM swallowed the green but had to drink cool water as the green started to taste more like red.

With IWMs warning phase, negative floor trader’s pivots and declining slope on the 10 daily moving average, he turned red.

Sister Semiconductors (SMH), in a bullish phase tends to reach for green. The trading range narrowed and closed inside Tuesday’s trading range. Her green chile tasted mild. However, she has been duly warned to think carefully before making her next chile decision.

If SMH breaks under Monday’s low, safe to say she got a hot green chile and turned red. A move over Friday’s high and we will know better that green was the correct choice.

Regional Banks (KRE), also in a bullish phase, felt overconfident and grabbed a red chile thinking it would be mild. It wasn’t.  So by the end of the trading session, he spat out the chile and felt kind of sick.

As usual, I find Grandma Retail (XRT) most compelling. Granny, a bit confused, took two chilies to eat, one red and one green. Feeling lucky after ingesting the green chile, she took a pretty large bite out of the red one. As a result, XRT has 2 inside days right above the 200 DMA.

Will the taste of the red mellow or will it leave its mark forcing Granny to avoid nourishment for a couple of days?

With XRT’s 2 inside days above support and IBB’s move over the 50 DMA, Thursday should help the rest of the market decide how much spice it can take.

Watch which way the trading range breaks for Grandma and watch how Big Brother Biotechnology holds the 50 DMA.

Meanwhile, if you can’t stand the heat of the chile peppers, it’s ok to eat a bland diet.

S&P 500 (SPY) Held the support again at 212. 2 Inside days so the range break either way will be telling.

Russell 2000 (IWM) Confirmed warning phase. Inside day. Not the best performance by far

Dow (DIA) 180 or gremlins at 18k in the Dow coming right up

Nasdaq (QQQ) It’s all up to the QQQs still bullish. If fails 115 another nail in the coffin. A move over 116.50 reasons to be cheerful

XLF (Financials) Closed just below the 50 DMA for an unconfirmed warning phase

KRE (Regional Banks) If breaks 41.50 expect to see the 50 DMA. If not, like to see this back over 42.60

SMH (Semiconductors) Needs to clear 65.75. 63.50 the 50 DMA

IYT (Transportation) Coming into some support at 138.50 but needs to reclaim 140 now

IBB (Biotechnology) 280-290 a range to watch break

XRT (Retail) Held support at 43.30. With 2 inside days, watch 43.00-44.50 range to break

GLD (Gold Trust) Seems to me, once the market realizes that gold is the new safe haven-it will go up again.

SLV (Silver) Over 18.25 better

USO (US Oil Fund) 9.95 support

TAN (Guggenheim Solar Energy) 19.02 the 2016 low

TLT (iShares 20+ Year Treasuries) 128-130 is the target from the channel short on the monthly chart.