December 19, 2018
By Mish Schneider
One might say that Jerome Powell ended the potential Santa rally into year-end.
Or one might say that Powell keeps the bull’s hope alive, given the “dovish rate hike.”
Or, one might say that the market has been weak all year and that the rally in the Dow to new highs in October was the devil in disguise.
Regardless of the reason, the Dow was up 250 points before the FOMC announcement, and then fell by 500 points an hour later.
By the end of the day, the Dow closed down 350 points.
Is it time to call it a wrap for 2018?
If you ask the Modern Family, all of whom are in bearish phases, they say make like a bear and hibernate.
Let’s throw some numbers on that.
The Russell 2000 IWM, made a new 2018 low and traded beneath the 200-week moving average today. That 200-WMA number is 134.58, making it a key price point for Friday’s close.
As you know, the Regional Banks ETF KRE, broke the 200-WMA last week when it fell beneath 50.15 (now trading at 46.12).
Next point to consider in KRE is the 7-year cycle MA at 44.00.
Semiconductors SMH, had a 2018 low until today at 86.95. Today’s low was 86.50. Call it mild relative strength, SMH did manage to close right at the February lows.
Transportation IYT, also traded down to the 200-WMA at 163.84. Yet at this point, IYT managed to hold it.
Biotechnology IBB is well under its 200-WMA and like KRE, has the 7-year cycle MA coming in at 89.55.
To round the Family out, Retail XRT, is the first of the Family to trade below that 7-year cycle MA.
A Family united is powerful, in both good times and bad.
When times are bad, it behooves those who still think the market will come back, to consider what they want their holiday Family portrait to look like.
Do you really want your Family to look like mounted devil heads donning straw and petrified antlers?
Trust me, you will not look any better if you put Santa hats on your heads.
S&P 500 (SPY) Possible and I mean possible, this was the blow off to new 2018 lows with huge volume. How will you know? 249.35 will hold and this will have either Thursday or Friday, a green day also with big volume
Russell 2000 (IWM) Also possible here, but only if it closes this week over 134.58
Dow (DIA) 233.20 the April low now a good pivotal number for this to clear if it has any chance of it being overdone on the downside
Nasdaq (QQQ) 150.13 the 2018 low. Not so far away now. 157.45 resistance to clear
KRE (Regional Banks) 44.00 support. 50.15 resistance
SMH (Semiconductors) 86.95 pivotal number
IYT (Transportation) 163.90 the 200 WMA
IBB (Biotechnology) 97.90 now resistance with 95.00 some support
XRT (Retail) 40.00 support. 42.38 is the point to clear back above
Every day you'll be prepared to trade with: