October 6, 2019
By Mish Schneider
Typically called the dead cat bounce, for our purposes, we are calling this the Kitten Bounce.
That makes more sense to us right now.
For starters, Nasdaq 100 went back into an unconfirmed bullish phase.
Not surprising as last week’s Daily mentioned that the QQQs were “The best looking of the indices. Clearing the 188.50 50-DMA would make it even stronger.”
NASDAQ closed at 188.81.
It must do so again. Also noteworthy is that the 50-DMA is now at 188.41 (which means the slope is negative.)
That puts the bullish phase as a weak one.
Furthermore, Sister Semiconductors SMH, stayed in a bullish phase even with her Granddad Russell 2000 in a nagging bearish one.
Again, no surprise as SMH and QQQs have traded in their own universe while the rest of the Modern Family continues to struggle.
From a fundamental standpoint, the jobs report looked great except, hiring in the private sector slowed and wages remained flat.
Earlier last week, the manufacturing statistics were very weak.
So, why is tech and NASDAQ so strong?
Lower rates to come, impeachment talk diluting in importance and corporate buybacks not seemingly halting anytime soon.
With all that said, the economic Modern Family says a different story about the market.
Again, not exactly a firm dead cat bounce justification; however, a definite adorable kitten one. Or maybe just a hat trick.
Top left we start with The Russell 2000 IWM, our granddad. Although the large sell off had this test and hold support, the ensuing rally still closed under the 50-WMA (blue.) With the Daily chart in a bearish phase, unless this can get back over 151 and hold, this is a sell rallies indication.
Top middle is Prodigal Son Regional Banks KRE. This too held support at 50.00, but closed out the week in a distribution phase under the 50 and 200-WMAs.
Ideally, to get excited, this has to take back 52.80, with gusto!
Top right is Tran sib Transportation IYT. This too held support at the 175 level, but is also closing under the 50-WMA.
Bottom left is Granny Retail XRT. Already in a bearish phase on the weekly chart, unless that changes or clears 43.33, XRT is rangebound with 40.00 next support to hold.
Middle bottom is Big Brother Biotechnology IBB. Well underneath the weekly MAs, this has to first clear 100 and if not, hold 97 before we see a 10-year trend reversal lower.
Finally, our superstar Sister Semiconductors SMH held 116, which is now the important level bears will be watching. On the other hand, until it takes out 123.13 or the last swing high, we are still working a double top potential.
The kittens will undoubtedly grow to become cats. What the market needs is to see this rally go from a kitten to a cat, and a live one at that.
Russell 2000 (IWM) see commentary
Dow (DIA) 265.45 gap filled. An unconfirmed bullish phase if holds 265.17
Nasdaq (QQQ) 188.41 50-DMA must hold.
KRE (Regional Banks) See commentary
SMH (Semiconductors) See commentary
IYT (Transportation) Has not filled the gap to 181.08
IBB (Biotechnology) See commentary
XRT (Retail) 41.10 50-DMA pivotal.
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