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I am a linear thinker. I like indicators that show conditions of the market. 

For today, I picked four indicators that should help guide us on the next moves in the market. 

And please note, it must last longer than an intraday move, or a daily move. We need to see a pattern. 

1. HYG settles down  

Junk bonds are a constant topic in my universe of indicators. Not only to measure risk (currently risk off) but also to measure appetite for low balance sheet, high paying yield companies. 

In 2020, HYG flashed the warning before the market did. 

Now, the move lower was dizzying. However, 75-76 is support. 

Under 75, I would get even more defensive. 

Over 77, I would start thinking about buying equities.

2. Growth starts to outpace value 

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Every rally we have had for a long time started with buying in the growth stocks. Call it tech, semiconductors, or MAG7, they have led or as in the case of last year, lagged. 

Growth caught a bid today. However, the bounce is meager and needs to prove more.

3. XRT or consumer sector stabilizes 

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I hope most of you know by now about my Granny Retail indicator. 

As 70% of the GDP, XRT reflects fears about a few issues besides tariffs. Debt, geopolitics, inflation, recession, and savings are a few of the consumer’s list of worries. 

XRT began selling off in January. Now, it has crashed.  

It must stabilize and tell us that the consumer has gone from extreme worry, to it’s not so bad. 

The chart needs to see a move at least, above 65. 

Lastly, people want to see lower interest rates.  

But is that such a great thing? 

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4. FFs remain above 3.75%

During periods of economic growth, the Federal Funds rate remains flat or rises. 

During the 1960s, they rose. 

During the dot.com bubble, financial crisis and Covid, they fell. 

We like them around 4% but note that they have turned down this month. 

They turn during recessions. Just look at the shaded areas. 

We are not there yet but watch I would be concerned if they break under 3.5%. 

Let’s check… 

Junk bonds calmed down - NO 

Growth is outpacing Value - not in a sustainable fashion right now 

Retail has found a bottom - NOT YET 

Fed Funds are stable - MAYBE 

ETF Summary  

(Pivotal means short-term bullish above that level and bearish below)  

S&P 500 (SPY) 480 today-that has to hold up 

Russell 2000 (IWM) 180 now pivotal  

Dow (DIA) 35,000 I remember it well 

Nasdaq (QQQ) 380 has to hold 

Regional banks (KRE) 45-46 last year support level 

Semiconductors (SMH) 165 is huge to hold 

Transportation (IYT) Breaking down unless it gets back over 57 

Biotechnology (IBB) 115 area is big support to hold 

Retail (XRT) 65 and above way better 

More By This Author:

Trifecta Of Inflation To Watch
Retail XRT Goes Green
Time To Look At Fixed Income And Inflation Protection