Is the Market Like a Rose in a Bubble?

The Russell 2000 IWM, like the perfect rose on Valentine’s Day, fell right to the tick, the support level mentioned in last night’s Daily.

“Russell 2000 (IWM) 152.40 now pivotal support.”

Furthermore, Transportation IYT, added a heart above the quintessential rose, when it cleared another key level mentioned.

IYT (Transportation) 185.50 now support with 189.74 the next bigger resistance point.”

And the tissue paper came in the form of Retail XRT when it also wrapped up perfectly,

“Yesterday, Retail (XRT) finally cleared the 200-WMA at 44.66.”

And that is after an abyssmal retail sales number. The lowest since spring 2009.

So with all these hearts and flowers, why must we still consider that they sit inside a glass bubble?

Besides the obvious fundamental risks-a decision by the government to avert a shutdown but with a declaration of a national emergency to fund the “wall,” and the trade war with China- the interest rates and U.S. Dollar are my main focus for 2019.

Of course, I will let the technical indicators guide us, especially when it comes to the Modern Family, all still perky right now.

Yet, admittedly, I am fixated on the rates and the dollar.

Here is why.

The Fed has turned dovish.

The global economy, including China and Europe, has shown signs of a downturn. The U.S. just saw weak retail sales numbers. That is on top of lower business and consumer sentiment.

What the Fed does impacts the global economy.

That the Fed has stated that the rate hiking cycle may be over, could interpret as a looser policy down the road.

That could turn out goosing inflation.

With the Fed on hold and with any downturn in the U.S. economy, that could also create stagflation.

The dollar remains the world’s reserve currency. And with its recent strength, it has stinted commodities from rallying.

Yet, should the dollar soften, then that too is worth noting. The ratio between stocks and commodities is still near a historical 100-year low.

In the meantime, last night I mused that if the Russell 2000 IWM reaches 157.00, that could be it for this rally.

And if it cannot get there, watch Transportation to hold or fail 189.74.

As far as roses, hearts and bubbles, all that beauty can easily burst.

S&P 500 (SPY). 274.17 is the 200-DMA and now pivotal support. 276.30 some resistance

Russell 2000 (IWM) 152.40 now pivotal support. 157 is the number we are watching for resistance

Dow (DIA) Last swing high before the crash in December was 258.04. If cannot get there, must try to hold 252.50

Nasdaq (QQQ) 171.74 the 200-DMA tried and failed. Now pivotal with 169.75 support

KRE (Regional Banks) 55 pivotal with 56 next resistance and 54.00 support

SMH (Semiconductors) 100.90 key pivotal area on weekly chart. Lots of overhead resistance from here

IYT (Transportation) 189.74 pivotal point.

IBB (Biotechnology) 109.92 the pivotal point.

XRT (Retail) 44.66 pivotal for the week. 43.50 the must hold spot. 46.80 resistance