April 4, 2018
By Mish Schneider
Yesterday, I introduced you to the first of the economic Modern Family dolls.
Transportation sector ETF IYT or our Trans, as mentioned, is extremely important to the macro picture.
Yesterday, with IYT green, the S&P 500 recaptured the 200 DMA to enter back into an unconfirmed warning phase (improved from Distribution).
It confirmed with the second close above 258.76.
And as written 2 nights before, “if SPY holds 256.20, especially by the end of this week on a closing basis, then we will see a relief rally at the very least.”
That is happening already.
The second doll in the series is Big Brother Biotechnology or the ETF symbol IBB.
He is a chemist who lives in Connecticut, where many biotech firms are located.
What makes IBB an integral part of the family, is that not only does the US have huge resources for research and development in big pharma, but it is also a sector that is heavily speculated.
That means, if IBB is happy, the market is most likely happy too.
What did IBB prescribe just in the nick of time?
I show you the Weekly chart in the photo.
The green line is the 200 week moving average.
The red and dotted lines are exponential MAs.
The blue is the 50 WMA.
Coming into today, IBB had the potential to overdose the bulls with a lethal injection under the 200 WMA.
Instead, IBB opened right on the 200 WMA and rallied.
Although it still has quite a lot of resistance at the 50 WMA and the 2 exponential MAs, today’s move proves that bulls are out there waiting to buy the dips.
Furthermore, as institutional investors use the 200 WMA, hedge fund money came in as well.
Perhaps the most compelling indicator is on the Daily chart (not shown), where IBB made a new low since last June and then reversed creating a classic slingshot pattern.
Moreover, with opiates in our bloodstream, we now have a distinct line in the sand under today’s lows.
Should IBB continue the run, I’d like to see it clear 107 and then 109.
If it cannot make it through those numbers, also watch Transportation, IYT.
In much better shape than IBB on the charts, IYT held but did not close green today.
That means, IBB has to find his brother, and give him some of his magic pills so he can get back over 188.50.
Then, we have something to really get high about.
S&P 500 (SPY) Confirmed Warning Phase Over 263 could see move to 267 then 269. Must hold 262.25
Russell 2000 (IWM) Today’s makes 152 pivotal with a move over 153 a reason to believe market rally not done. Under 148 never mind
Dow (DIA) 241 now pivotal. 245.50 major resistance
Nasdaq (QQQ) Still must clear 161 and not fail 153
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