An Economic Family That Trades Together…

As I like to do on occasion for the weekend wrap-up, here are the weekly charts of the economic Modern Family to review.

From top left to right:

The Russell 2000 IWM (Granddad). Transportation IYT (Tran). Retail XRT (Granny Brick and Mortar).

From bottom left to right:

Biotechnology IBB (Big Brother). Regional Banks KRE (Prodigal Son). Semiconductors SMH (Sister Semi’s).

In what will be considered a legendary week filled with intimation rather than substantive news, all the Modern Family sectors rallied in unison.

Last weekend, I featured only the Regional Banks KRE.

The logic was that this sector began the weakness, so once it touched down on 2-year lows, it would most likely lead the market back up. Did that ever turn out to be the case.

Now we wonder, when will the Prodigal Son go humbly home to ask for forgiveness after this lavish rally?

Is this dead cat bounce nearly dead, or will we see more continuation since that December 26th low?

Sticking strictly to the technicals, KRE closed the week of 1/11/19 at 49.98 and closed this past week at 53.25. At the time when we dissected this sector, IWM, IYT, and IBB were already back above their 200-WMAs (green line). Once KRE joined the party, it helped IWM and IYT in particular, rally more into a daily Recuperation Phase.

Since SMH never broke the 200-WMA, that sector played catch up, which is more evidenced on the daily chart (it too is back in an unconfirmed Recuperation phase.) Notice that SMH still has a very long way to go to rally to its 50-WMA (blue line).

Granny Retail, by the end of the week, barely closed above its 200-WMA.

The Retail sector as a laggard, is not a healthy sign - it remains 70% of the gross domestic product. If in the coming week, XRT fails back below the 200-WMA, we can view that as a foreshadowing of the damage the government shutdown will do to the economy, (Once we can actually receive economic statistics again.)

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