Weekend Market Profile

Friday was quadruple witching day.

That means that many index futures and options, plus stock futures and options expired.

With expectations of increased volatility after new all-time highs in the SPY and DIA, the day was comparatively placid.

Yet another example of the volatility is in the hype, not the market.

Last Thursday, we saw lots of potential-and also some concerns if the bullish phases in the key sectors fail to confirm.

For example, Semi’s (SMH) confirmed the bullish phase. The “red” day was an inside day. The range going into Monday now is 106.50-108.

I like that clarity.

Transportation (IYT) is holding support. It must move up and though, over the ATH 209.43 to negate the topping pattern.

Retail, XRT, did not clear 51.80.  It needs to, but for now, the momentum to the upside appears intact.

Biotechnology (IBB) confirmed the bullish phase, while Regional Banks (KRE), went back into an unconfrmed warning phase.

What did impress, was the move up in emerging markets and oil.

Marijuana was a big winner as well, with tremendous swings.

However, I look at that as an adjunct market, not so much as a key to the macro picture.

If looking at the overall market like an FBI profiler, what “personality” traits should we watch out for?

Besides the need for the sectors and the indices, to hold up, 3 things makeup the market’s profile:

The Dollar.

As measured by UUP, the Dollar Bull ETF, it closed above a key weekly moving average, but below the pivotal 25.00 level.

Further declines will certainly have an impact.

Should UUP break under 24.80, that dollar weakness bodes well for commodities, the euro and emerging markets, something we wrote about in the last couple of weeks.

In fact, the move higher in EEM and FXE, for instance, already begun.

The Rates.

Since I prefer to speak from the charts, using TLTs, the ETF for the 20-year Treasuries, the breakdown is significant.

Mortage rates are the highest they have been for the last 4 years.

TLTs broke support when it failed 118. However, the bigger breakdown happens if TLTs go below 116.

Currently, that level is holding. This week the Federal Reserve meets. Based on the charts, we expect the Fed to stay the course-holding rates firm, with plans to raise more next year, albeit slowly.

The Commodities

At the risk of sounding a little like the trader who cried wolf, the agricultural commodities may have finally bottomed.

Same with the metals, especially the miners. Copper had itself a rally.

Oil, also sans the volatility one would expect with the breakout over the 200-week moving average some weeks ago, is consolidaitng.

USO, the US Oil Fund ETF, looks ripe.

If we put those factors all together, like a police composite if you will, we have a face that resembles what could turn out to be a serial killer.

Falling dollar, rising commodities and higher rates.

What will this killer go after?

Equities.

Especially those that are rate sensitive. Like REITs.

The falling dollar will hurt consumers, which of course will hurt supply.

The Retail sector will also be impacted.

While SPY and DIA are strong, QQQs and IWMs are in a range, trying hard to hold onto their bullish phases.

While we have a profile to look at, we still do not have a real photograph, hence, the details remain sketchy.

Nevertheless, keep watch for a “most wanted” poster on your trading platform, should the 3 personality traits become a bigger trend.

S&P 500 (SPY) 291.74 the old high now the support to hold

Russell 2000 (IWM) 170 now pivotal support with 169 the 50 DMA and we still want to see this clear 172. Then 173.

Dow (DIA) 265.93 the old high from January now support.

Nasdaq (QQQ) 183.50 should continue to hold now if good. 181 key support

KRE (Regional Banks) Closed under the 200 DMA at 62.58 for an unconfirmed phase change to warning. Needs a second day to confirm

SMH (Semiconductors) 106.38 the pivotal area to hold-confirmed the bullish phase.

IYT (Transportation) 206.70-207.22 pivotal area. If fails to hold, 203 next big support. Otherwise, the ATH is at 209.43

IBB (Biotechnology) 117.83 the 50 DMA now the pivotal 50 DMA support as this confirmed the phase change to bullish.

XRT (Retail) 51.80 a good spot for this to recapture. The 50 DMA below is at 50.90.