The Market’s had its share. Today’s good times: Regional Banks (KRE) jumped from a Distribution to Warning to a Bullish phase. And, in the course of 2 days. Good times because the financial sector reacts better in an environment where the Federal Reserve has enough confidence in the economy to hint at a policy of continuing to raise the interest rates.
Today’s bad times: Biotechnology (IBB) went into an unconfirmed Distribution phase. Bad times because the Biotech sector attracts speculators, which in turn attracts liquidity to the overall market. Should speculators exit the market-or choose not to enter the market at this time-that leaves the market vulnerable to a lack of liquidity. Without liquidity, the market either stagnates, rallies or sells off on low volume.
Should speculators disappear from the market, how will any faux move-similar to the faux Led Zeppelin band (Moby Dick), interpret for the market? Thus far, Transportation (IYT) confirmed a warning phase. Retail (XRT) is in a bearish phase. The Russell 2000 (IWM) confirmed the warning phase. Sister Semiconductors (SMH) remains a bright spot. If SMH holds 102, that could help a faux rally become real. However, should 102 break, along with the other aforementioned weak Modern Family sectors, the market could see a very real dump. While Granny Retail keeps it old school, brick and mortar retail chains must see traffic as we start the holiday season. Even if online shopping is robust, after the New Year, should liquidity die and consumer confidence wane, I expect more bad times coming. Two indicators to watch all the time, but especially right now, are the U.S. dollar and interest rates. Should UUP (the dollar ETF) break 24.25, gold and silver will rally. Inflation, already picking up, will increase.
The agricultural commodities might find new interest after years of languishing near their historical lows. Interest rates, already artificially low, cannot go lower. Well, they can. However, the positive impact that lowering rates during the last 9 years have had will reverse to impacting fear. We get it. Bulls want to hold on to the rally like 1960’s rockers want to hold on to Zeppelin. Nevertheless, good times bad times, time itself marches on.
