Who Rocks? The Economic Modern Family, That’s Who!

In spite of no passing stimulus, mixed economic data, rising COVID cases and a wild pre election season, for the first time since we can remember, the Economic Family is brushing off most of the negativity. 

For years, we would report on the health of the family with words like “lagging,” warning,” and “sick.”

All except Sister Semiconductors of course, who has been the wonder woman star of the whole market for years.

While Nasdaq (QQQ) and the SPY would make new all-time highs, the Russell 2000, Retail, Transportation, Biotech and Regional Banks would inch up or sell off, with all-time highs far off in the distance.

Until now.

The dialogue has changed as Transportation IYT and Granny Retail XRT made new all-time highs this past week. Biotechnology IBB did so a few weeks back.

The creation of the Economic Modern Family is based on the notion of economic cyclicals and non-cyclicals.

Granddad Russell, Granny Retail and Tran are all considered to measure the “inside” of the economy. Hence, through the last many years, they told us that lots of the NASDAQ and SPY buying was due to corporate buyback, low corporate taxes and close to zero interest rates. Hardly a measure of the true economy.

So what has changed? Why all of a sudden is the Family leading? Is the economy heading towards a better and truer roseate future?

Logically speaking, with COVID around us, the market assumes the economy will stay open. Furthermore, the economic stats are mixed-jobless claims rise while retail sales (Retail sales had five solid months of growth, with this month's report coming in 1.9% higher) and consumer sentiment rally.

Is this because the worst is behind us no matter who wins? Stimulus has become the new heroin and the search for a fix continues?

Ours is not necessarily to find these answers but rather to watch the price movements on the charts.

Looking at the weekly charts to gain a better perspective, can Granny retail XRT lead the charge to higher prices?

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