Consolidation Or Massive Breakout?

June 30, 2019

Mish's Daily

By Mish Schneider

blankYesterday I drew ‘hidden’ lines on the charts of the Modern Family to highlight the transition that was occurring from bearish to bullish sentiment.

On Friday that shift continued as they all moved higher.

Those lines will still be important support if the market sells off in the short-term, but now there are more important lines in sight.

Remarkably, the Modern Family is now very much in synch, and as a result, there is chance that they could all breakout of their respective consolidation patterns together.

Additionally, based on our proprietary Real Motion indicators, Grandpa (IWM) is more ready to rally than I believe most people think.

The chart of the Modern Family below illustrates how all of the members other than SMH are at or near their respective consolidation breakout levels.


As a result, this is either a great time to expect the market to stop and reverse, to or accelerate higher.

You don’t need to decide what the charts are going to do next.

As I suggested yesterday…

If they move higher in unison, you may want to give the bulls their chance…”

SMH is already over its key level.

If several other members follow suit, then the stage is set for a new move higher.

As I suggested earlier, IWM is also stronger than it has been in some time based on our Real Motion indicators.

Real Motion measures the trend in momentum and this trend is not always in alignment with the trend in price.

When Real Motion’s trend contradicts the price trend, the price can struggle or even reverse.

In the chart below, Real Motion is measured on a 10-day (magenta) and 50-day (blue) basis. The same time frames are displayed on the price chart.

The dots on Real Motion are 1-day measures.


As illustrated by the red circle, in March through most of June the 10-day Real Motion measure was under its 50-day measure. In this condition it’s not surprising that IWM had trouble rallying in April and then sold off in May.

You can see by the green circle that a more bullish Real Motion condition is developing.

If IWM continues to trend higher, Real Motion is likely to do the same given its current trend.

So with Real Motion and the price trend now in synch, IWM is in a much stronger position than it was earlier in the year.

If you have Real Motion, I’d encourage you to look at the Modern Family with this perspective. XRT and IBB also have very interesting conditions.

If you’d like to learn more about Real Motion there, may still be a webinar available here.

Best wishes for your trading,

Geoff Bysshe

Mish is still recovering from back surgery so Geoff is filling in temporarily

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S&P 500 (SPY) Key support areas are 290 and 287.80 which is price level and 50-DMA. Resistance at 293.50 and 294.50. New high is 296.31

Russell 2000 (IWM) Nice strong follow through day that stopped at the prior swing high. A break over 156.22 is a new swing high. Near-term support at 153 and then 150.50.

Dow (DIA) 267 is close resistance.  Until a close over 268 look out for more weakness. 264 may offer support, but the bigger number is 263.

Nasdaq (QQQ) Three narrow range or inside days with interesting low around 185.50 support. Needs to break over 188 resistance. 183.80 is support and 50-DMA.

KRE (Regional Banks) Highest close in a month and over key 52.50 level. Next level to clear is 53.00.

SMH (Semiconductors) Closed at low of the day but edged higher on the day. The 110-112 is a very pivotal area.  Should find support around 108 and then 106.80.

IYT (Transportation) Nice 2nd up day after an inside day. Needs to 190 to look good. 183.50 is not support then 181.40.

IBB (Biotechnology) Inside day on the 10-DMA. Needs to clear 110 to be bullish, but as I stated yesterday a move over 107.50 it looks like an interesting trade with stop under 105. We got it.

XRT (Retail) 43 is the level to clear. 41.30 and 41.00 are significant support.

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