March 5, 2020
By Mish Schneider
Coming into today’s session, Biotechnology IBB was the only member of the Economic Modern Family that was not having an inside week.
Those wondering why Biotech is part of the Family, have gotten a birdseye view at the sector’s relevance.
As both a cyclical (goes up in a strong economy) and a non-cyclical (outperforms in a weaker economy because it’s a staple), IBB felt the pressure, but held up well.
Three of the other Economic Modern Family members are still trading inside last week’s trading range.
Two very important and not so surprising members broke their lows.
Regional Banks, as mentioned back on January 15th, Why Regional Banks KRE is the Prodigal Son, broke below the 50-daily moving average and went into an unconfirmed caution phase.
That was for us, the first sign the market was in trouble even though the SPYs and QQQs were still making new all-time highs.
If your are new to the Daily and want to know more about the Modern Family, go to our website, click market beat and then the tab for Mish’s Modern Family.
Regional Banks not only told us not to buy equities, he also gave us a reason to buy bonds and metal miners.
Today, KRE broke last week’s low and worse, closed well below it.
Additionally my “go to” Transportation IYT broke last week’s low.
If you want to measure the health of the market, Transportation or the “demand” side of the economy fits the bill perfectly.
That leaves Granny Retail XRT, the Russell 2000 IWM and Semiconductors SMH all still above last week’s lows.
Friday, we will be watching IWM to hold 143.91 or not. If the “supply” side gives it up, prepare for another nasty day.
Furthermore, XRT below 39.16 not only breaks her lows from last week, it also makes the multiple lows at 38.50 suspect to hold yet time.
Semiconductors SMH also hold last week’s lows and the inside trading week. Can she save the market?
Sorry Wonder Woman. Even super heroes need their posse when the going gets rough. She too will watch her Granddad, Granny and brother Tran.
Russell 2000 (IWM) Inside week-Has to at least clear 148 and hold 143.91.
Dow (DIA) Inside week. Has to clear 268 at least and hold 247.
Nasdaq (QQQ) Inside week-Has to at least clear 219.61 and hold 209.
KRE (Regional Banks) Last week’s low 46.42, should we close above it, could be a sign of some relief.
SMH (Semiconductors) Inside week and inside day. Interesting. 138-133.25 range to watch
IYT (Transportation) Last week’s low 163.89, should we close above it, could be a sign of some relief.
IBB (Biotechnology) Inside day. 120 pivotal with 117.50 key support
XRT (Retail) inside week-Has to at least clear 41.00 and hold 39.16
Volatility Index (VXX) Broke out over 25.00 and ran
Junk Bonds (JNK) Also an inside week with 106, support and 108 resistance and a break of 104.92 trouble
Every day you'll be prepared to trade with: