After a week fraught with news and emotions, the market managed to fly above the fray.
Although SPY closed red, it is holding support and still has an underlying upward sloping 50 day moving average.
However, it closed under its fast moving average, which is beginning to show a downward slope.
NASDAQ (QQQ), fared better. Plus, QQQs had an inside day, which means that it traded within the trading range from the day before. QQQs also held the fast moving average, which is better than what the SPY did.
The index, though, that could send the flight into turbulence is the Russell 2000 (IWM). Despite the green close on Friday, it traded below the 50 DMA. Furthermore, the fast moving average (negatively sloped) is about to cross below the 50 DMA. We often find that crossover a reliable precursor to more downside.
All last week, we also focused on the dollar, interest rates, commodities (especially oil) and the transportation sector. If we are passengers on this flight, how will we know if we should stay strapped in our seats, or are free to roam about the cabin?
Beginning with the US dollar, it firmed even more. The interest rates also firmed, but have not broken critical support. Logically, we figure that if the dollar and the yields rise together, at the very least, the lagging financial sector should kick into gear.
However, the fins have not participated.
Regional Banks, KRE, are in a distribution phase. Plus, KRE closed below the 50-week MA for the first time in a year. Without the confirmation of having the financial sector in the game, it is difficult to say with authority why the aberration between rates and the banks exists. Typically, banks like higher rates.
Perhaps the aberration exists because the oil prices keep rising. On top of that, wages rose but rose less than expected. It’s getting expensive to fill up your car. It’s getting expensive to ship, fly, and drive. That hurts consumers.
