Want To See What A Rally Into Resistance Looks Like?

Last week on Election Day, I posted the same chart with the headline, “Sometimes a Picture Says More Than Words.”

What seems like ages ago, the conclusion on November 6th was “Seasonals favor Retail, but with the rest of the Family in warning, unless IYT saves the day, market remains under pressure.”

Now, here are those same six weekly charts of the “Modern Family” just a few days later.

Except for Retail XRT, which remains above the 50-week moving average, all the rest either tried and failed, or could not even get close to their 50-WMA resistance points.

Furthermore, note the slopes on the 50-WMAs (blue).

Only the slope on the 50-WMA of XRT is positive.

The rest of the charts show either a neutral or declining slope.

Why then, do we see so many bulls calling for new highs?

Perhaps the best part of looking out at different time frames is the perspective can be clearer. I saw lots of folks this week, calling for another 5-6% rally in the S&P 500.

I’ve seen predictions that Thursday’s and Friday’s move lower is merely digestion and not anything more to worry about it. I will not say yes or no to those comments. Everyone has an opinion.

Rather, I want to see and teach you how to see technical evidence. The cleanest place this week to look for evidence of a possible rally or more selling, is the Semiconductors SMH chart.

SMH had a textbook inside week. That means this past week, the trading range was within the trading range of the week prior.

To put numbers on that, the high for SMH to clear is 98.13. The low for SMH to break is 86.95. With SMH closing the week out at 95.49, we see indecision.

To add another layer to that, look at the weekly chart on Transportation IYTThe rally to its 50-WMA (193.59), speaking of clean, was nearly perfect. The high last week for IYT was 193.09. Again, should IYT clear the 50-WMA, new ballgame. Otherwise, if last week’s low in IYT at 185.10 breaks, I’m sorry to tell the bulls this--you lack evidence.

However, the bigger point is this - why listen to anyone, even me? Learn to read price. And right now, with only 2 simple Modern Family sectors, I am hopefully teaching you how easy it is to exercise patience and wait for the obvious signals.

S&P 500 (SPY) The 200 DMA support line is at 276.07. The 50-WMA is lower at 275.16. Back over 281 impressive.

Russell 2000 (IWM) 155 now the point to clear back over. 152.40 closest support

Dow (DIA) 258.70 is the 50-DMA support this must hold

Nasdaq (QQQ) 172.27 the 200 DMA the point to recapture. 170 closest support

KRE (Regional Banks) 55.00 pivotal support

SMH (Semiconductors) 98.13 last week’s high. If that clears, we can see 101.50. If not, and this fails 94, worry.

IYT (Transportation) 190 pivotal with 193.70 the wall of resistance this must clear. 186.65 the closest support.

IBB (Biotechnology) 111.25 is exactly where the 50-WMA sits. The must hold spot is 106.

XRT (Retail) Unconfirmed warning phase. 49.35 the 50-DMA and support at 48.20.

Disclosure: None.

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Daniel Robertson 5 years ago Member's comment

Nicely done.

Michele Schneider 5 years ago Contributor's comment

Thank you very much for saying so!