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Critical Intersections for Small Caps, Retail, Semis, and Long Bonds

The overall market is at a crucial intersection.

Let’s take a deeper look at a few Modern Family members, focusing on semiconductors (SMH), long bonds (TLT), small caps (IWM), and retail (XRT). These sectors will be crucial to determining the market’s trajectory for the rest of the year.

You can see on the daily chart above on Grandpa Russell (IWM) how close IWM is to the 200-day moving average, serving as resistance to higher highs. Also evident is lower support for IWM, around 176. Small caps are displaying weak momentum in our Real Motion Indicator. Our Leadership/Triple Play Indicator also exhibits weak leadership performance relative to the S&P 500 (represented by SPY above). If IWM can get through 190, that would indicate that we will have a more sustained rally, but problems are ahead for if IWM breaks down below 182.

So, what are the other key sectors telling us right now?

Retail sales were mixed over Black Friday, with online sales setting a record. XRT (Granny Retail) is at an intersection – if it breaks down under 67, it could go back to 64. The Real Motion Indicator and Leadership/Triple Play Indicator signal Granny Retail’s price still has momentum strength and leadership displayed. If XRT can get through 66-67.55, that will be a big positive for the US consumer. Otherwise, we might see a move down.

The Leadership/Triple Play Indicator for SMH also exhibits strong leadership performance relative to SPY above indicating continued outperformance. But, if SMH breaks 212, it could fall back to 200, near the 50-day moving average, signaling continued weakness in the tech sector.

Bonds have been in demand as a safe haven asset, but this may not continue as rates rise. The TLT’s Leadership/Triple Play Indicator exhibits strong leadership performance relative to the SPY, indicating continued outperformance. TLTs (long bonds) still need to go through 103.85. They need to cross this price to indicate a more bullish sustained move upward.

At this point, it’s hard to say if the market is in a risk-on or risk-off mode. We will continue to watch these sectors; if they can’t rally and get over these price levels, it could be a sign of trouble ahead.

Rob Quinn, our Chief Strategy Consultant, can provide more information about our proprietary trading indicators and Mish’s trading service. Click here to learn more about Mish’s Premium trading service with a complimentary one-on-one consultation.

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Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish hosted the Monday, November 28 edition of StockCharts TV’s Your Daily Five, where she covered some of the Modern Family. She also discusses the long bonds and gold with levels to clear or, fail.

Read Mish’s latest article for CMC Markets, titled “What’s Next For Key Sectors After the Midterms“.

Mish explains why MarketGauge loves metals and is still patiently loading up equities on Business First AM.

Mish talks metals, rates, dollar, and which sector to buy/avoid in this appearance on UBS Trending.

See Mish talk with Charles Payne on Making Money about the Oil markets testing the limits of Fed policy, China, and what to buy in the metals.

ETF Summary

S&P 500 (SPY): 390 support and 400 resistance.Russell 2000 (IWM): 178 support and 184 resistance.Dow (DIA): 335 support and 342 resistance.Nasdaq (QQQ): 278 support and 286 resistance.KRE (Regional Banks): 60 support and 65 resistance.SMH (Semiconductors): 210 support and 220 resistance.IYT (Transportation): 219 support and 227 resistance.IBB (Biotechnology): 129 support and 135 resistance.XRT (Retail): 63 support and 68 resistance.

Mish Schneider

Director of Trading Research and Education

Wade Dawson

Portfolio Manager

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