October 6, 2020
By Mish Schneider
Co-Written by Mish and Forrest
These past weeks we’ve talked about the market's hopes of a quick stimulus package.
Today showed how easily the market can flip when stimulus hope fades. It also shows that the market can trade higher on expectations even though it really didn’t know what would happen.
This is a good time to look back on the key market indicators to see if we should change a bullish bias or if we should wait for more confirmation.
JNK and VXX
We have recently kept an eye on these two, as indicators of market strength or weakness.
JNK shows investors appetite for high yield corporate debt, while the VXX shows short term volatility representing fear in the market.
JNK has been on a steady rally up to the 50-DMA. Today it broke through, but was not able to hold.
VXX moved up based on Trump's decision to halt stimulus negations until after the election on November third.
Watching the VXX tomorrow will be important to see follow through from fear holding or if it breaks down again.
The Modern Family is also good to watch.
On a daily basis the entire family is over 50-DMA.
If we see continued weakness then watching how those levels hold or don’t will tell us that the market is at risk of breaking down further.
People can change their mind on a dime's notice, but looking back at the technicals shows that we still have support at these levels and watching for them to break gives us actual data to support changing our expectations.
Russell 2000 (IWM) 160 Resistance 153 Support
Dow (DIA) 284 Resistance 277 Support. 50-DMA also support
Nasdaq (QQQ) 273 Support. Need to clear back over the 50-DMA
KRE (Regional Banks) Down on the day, but held the 50-DMA
SMH (Semiconductors) 181 resistance. Needs to hold the 50-DMA
IYT (Transportation) 200 support 205 resistance
IBB (Biotechnology) Support 134. 143 Resistance.
XRT (Retail) 56.66 Resistance with support at $50
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