Central Banks Hold Sacks of Potatoes with Their Tongue

September 18, 2019

Mish's Daily

By Mish Schneider

blankToday, the Federal Reserve cut interest rates by ¼%.

The division among the Fed runs from lower more to keep the status quo, to raise the rates.

However, is any of that meaningful in the long run?

The Russell 2000 IWM along with Granny Retail, Biotech, and Transportation sold off immediately after the Fed announcement.

They bounced some but still closed red.

Semiconductors and Regional Banks closed green.

The SPY, QQQ and DIA did as well.

Overall, the market sends us mixed messages.

When that happens, we need to look no further than the Modern Family.

We are still staking the next bigger move on what happens to Granny Retail XRT, or the brick and mortar sector of the economy,

Even with negative rates worldwide and the now lower rates in the US, are the Central Banks holding sacks of potatoes with their tongues?

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Why am I so focused on the retail sector?

First, it is 70% of the GDP.

Secondly, if the consumer is driving the economy, can online shoppers do enough?

Next, with consumer debt soaring, how much further can folks squeeze as we get closer to holiday shopping?

Finally, it’s always helpful to look at the weakest sector of the Modern Family as the drag or the place to catch up.

We see XRT in 2 timeframes. On the weekly chart, XRT is in a bearish phase. The recent rally did not have enough power to push the ETF over the MAs.

On the daily chart, XRT was in an accumulation phase. However now, it dropped back below the 50-DMA into a distribution phase.

Either XRT clears 43 first and then the even more important level or 44.00 or

XRT fails 42.00 and heads right to the the 50-DMA at 41.23.

And the biggest area to watch overall should that happen, is 38.00.

Since 2016, XRT has bounced from that level a half a dozen times.

Should Granny gives that up, no tongue will be strong enough to hold those equity sack of potatoes.

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S&P 500 (SPY) Found support at 298, but under that can see 295 quickly. And only a move above the new ATH negates the topping pattern.

Russell 2000 (IWM) Found support above 154.50. 160 resistance

Dow (DIA) ATH 273.99 made in July. 270 pivotal

Nasdaq (QQQ) 189.50 found support. 195.55 ATH

KRE (Regional Banks) 53-55 the range now to watch

SMH (Semiconductors) 120 support and ATH 123.56

IYT (Transportation) 190.00 pivotal and 200 overhead resistance. Under 190 is 185 or the 50-WMA.

IBB (Biotechnology) 105 or the 50-DMA cleared for a confirmed recuperation phase.

XRT (Retail) 42-44 range to watch

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