Long-time readers of the Daily should remember our Rallysaurus.
One of the first times I introduced the concept was in June 2016.
At the time I wrote, “A Rallysaurus, in honor of the “long in the tooth” rally the market has enjoyed, roams the US since 2010.”
“Our Rallysaurus, also at the top of the food chain, has hunted in packs feasting mainly on BEARS for years.”
And that was when the Dow was trading at 17,700 some 6,000 points ago!
Now, the Rallysaurus, peacefully feasting on anything that got in its way, is feeling a bit of the seven-year-itch.
With phases in several of the Modern Family deteriorating, the Rallysaurus must search harder for food, which up until recently was in abundant supply.
The Russell 2000, in a warning phase, sacrificed himself to the Rallysaurus today by trading down to but holding the major support at 144.50.
However, Granddad Russell is old. And thin.
Will the pop from key support in the Russell’s be enough to sustain the leaner and meaner Rallysaurus?
Yesterday, Regional Banks (KRE) jumped from a Distribution to Warning to a Bullish phase. Today, it confirmed the bullish phase.
However, KRE could not close above 55.69, yesterday’s high.
Biotechnology (IBB), even though it rallied from the 50-week moving average at 302, confirmed the Distribution phase.
Should IBB clear 308 and hold above there tomorrow, at least the Rallysaurus might score some good drugs to help anesthetize the recent pain.
I still believe that the Transportation (IYT) sector, in its warning phase, holds the ultimate key.
IYT, got close to the 200 daily moving average. Yet, the real level-similar to the clutch 144.50 level in IWM-is 168.50.
If both instruments fail those price points, I’d bank on the Rally’s extinction or at the very least, I would not put more money at risk on long equities.
Granny Retail (XRT), in a bearish phase, must be on a diet of Rallysaurus excrement. As the other sectors erode, Granny seems “fertilized”.
Although not quite trading over anything but the fastest daily moving average (10-DMA), XRT has the potential of forming a huge double bottom.
Should that confirm, how ironic would it be if brick and mortar saves the day-and the prehistory.
Last week’s low in Sister Semiconductors (SMH) was 101.12. If by the end of this week, that level breaks, highly probable a correction down to around 96-98 will happen quickly.
In Jurassic Park, that’s where most of the Rallysaurus’ have been dining. If food supply becomes scarce, watching multitudes of hungry predators scrambling to find a new food supply, will not be pretty.
The two indicators we are watching are the U.S. dollar and interest rates.
Should UUP (the dollar ETF) break 24.25, talk of inflation could increase.
Then, we dinosaurs will settle upon a new fertile ground-commodities.
S&P 500 (SPY) 256.36, last week’s low held on a closing basis. If breaks, 253.90 is where the 50-DMA support is.
Russell 2000 (IWM) It’s all about 144.50 area support
Dow (DIA) Broke and closed beneath last week’s low. Under 232 see 228.50 possible
Nasdaq (QQQ) 152 pivotal
KRE (Regional Banks) Confirmed Bullish phase. 55.35 the 50 DMA to hold
SMH (Semiconductors) 102.00 pivotal support
IYT (Transportation) 168.50 level key support
IBB (Biotechnology) 302 support to hold. If clears 308 better
XRT (Retail) Needs to get back over 40
IYR (Real Estate) 82.00 pivtoal support
GLD (Gold Trust) Still needs a close over 122
SLV (Silver) Like to see this clear 16.30
GDX (Gold Miners) Needs to clear 23.05 with volume
USO (US Oil Fund) As long as this hold above 10.50, I remain friendly
TAN (Solar Energy) If doesn’t get back to 24.99 an exhaustion gap top in play
TLT (iShares 20+ Year Treasuries) 123.50 the 200 DMA. 125.50 pivotal 126.80 resistance
UUP (Dollar Bull) 24.37 the 200-week MA with 24.25 next key support