Is the Market Rallying in all the Wrong Places?

April 2, 2019

Mish's Daily

By Mish Schneider

blankIn the three scenarios we laid out last night:

1. IYT clears that high and IWM plays catch up.
2. SPY reverses from its new swing high while QQQ and SMH never reach theirs.
3. IWM sells off, spooking everyone else making #2 more likely to happen.

We can kind of say all 3 happened to some degree.

First, Transportation IYT, cleared the last swing high to make a new one today at 192.40. The Russell 2000 tried to play catch up, but alas, turned red.

Which leads us to number 2. The S&P 500 didn’t reverse from yesterday’s high and in fact, made a new one today at 286.23.

NASDAQ also made a new swing high today trading up to 182.90.

The hold out? Semiconductors, which did not come close to 110.60, its last swing high.

Concerning point number 3, with IWM selling off, for most of the day, the rest of the indices got a bit spooked. They were all red until the last half hour of the day, when only QQQ and SPY rallied to close slightly green.

The Dow and the Russell’s closed red regardless.

So did Transportation IYT. And so did Granny Retail XRT, who if you recall, started this rally last week.

That leaves us asking, is this another rally in all the wrong places?

Let’s focus on Transportation IYT.

IYT made a new swing high today 192.40. It then closed near its intraday low.

It did not violate the 50 week moving average or the 200 day moving average.

That means that tomorrow is key. A close under today’s low at 190.81 will be considered yet another topping reversal. Especially, if IWM does not come to the party once again.

If IYT holds today’s lows, over 191.50, IYT regains the floor trader’s midpoint, important for intraday strength.

Then, we have to look not at SPY or QQQs. I hope by now you realize that it’s the economic Modern Family that gauges the real health of the economy and the market.

What I will focus on is IWM and XRT.

The Russell’s really need to hold the 50-DMA at 152.60.

XRT definitely needs to hold 44.50 (closed today at 44.88).

Both are huge components, along with IYT, of the US’s GDP.

So before you get your wires crossed, make sure you are dialing the right numbers!

S&P 500 (SPY) New swing high today at 286.23. Now we watch 285.09 today’s low to hold or not

Russell 2000 (IWM) Disappointing day. 152.60 support and must clear 154.88 to get any new life

Dow (DIA) A true inside day which makes this ready for anything

Nasdaq (QQQ) New high today at 182.90-now we watch today’s low 181.78 to hold or not

KRE (Regional Banks) 53.40 resistance stopped the rally making 51.40 the support to hold

SMH (Semiconductors) 110.60 the 3/21 high to clear. 106.85 immediate support

IYT (Transportation) A close under today’s low at 190.81 will be considered yet another topping reversal. 189.15 now critical support and a hold over 191.50 better

IBB (Biotechnology) 110.75-111.18 critical support to hold

XRT (Retail) 45.50 resistance and 44.50 key support

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