The Modern Economic Family now has five members sitting in a confirmed precautionary phase. A precautionary phase is defined by the 50-day moving average stacked on the 200-DMA, with the price between both moving averages.
As seen above, the only member that maintains an upward trend with a price above 50-DMA is the biotechnology sector (IBB). The increase in COVID-19 cases through the delta variant, along with the news that large pharmaceutical companies will offer COVID reinforcement strokes have helped support the biotech space.
Other members, including the Russell 2000 Small Capitalization Index (IWM), Transportation (IYT), Retail (XRT) and Regional Banking (KRE), are in the precautionary phase and will need to stay above the minimum support. from Tuesday to stabilize.
The last two members are Semiconductors (SMH) and Bitcoin ($ BTCUSD).
As SMH has already dropped from Tuesday’s low, the next level of attendance to watch is from the 27/7 low to $ 247.43. In addition, Bitcoin has trouble staying above the 200-DMA at 44k. If the 44k cannot be exceeded again, we could see a setback towards 40-42k support.
That said, the big picture is that most of the modern economic family is in a state of caution. However, the phases often switch between caution and the upward trend, making the overall market more volatile. Because of this messy environment, traders should be very careful in the future. This could involve adopting smaller position sizes, trading less, and closely monitoring existing positions.
Another thing to keep in mind is the Fed’s continued reliance on markets to move forward. The release of last month’s FOMC notes has given investors a taste of concern as the Fed struggles to decide how to start reducing economic policy.
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- S&P 500 (SPY): 436 next level of support.
- Russell 2000 (IWM): It supports the 200-DMA at 213.50.
- Dow (DIA): More than 351 need to be recovered. Next level of assistance 347.
- Nasdaq (QQQ): 362 support to maintain.
- KRE (regional banks): 64.72 fundamental level of the 50-DMA.
- SMH (semiconductors): It is necessary to recover more than 257.16 the 50-DMA. Upcoming support at 247.
- IYT (transport): Resistance 257.34.
- IBB (Biotechnology): Support area the 50-DMA at 164.50.
- XRT (retail): It needs to exceed 92.22. 98 resistance.
Deputy Director of Research and Education in Trading