Considering that the major stock market and sector ETFs we follow were struggling just a few weeks ago, clearly euphoria has hit the market since the election.
Especially with Bitcoin! More analysis on Bitcoin further below.
There are several key price levels to watch, not to mention a couple of key ETFs we follow that look good but not quite as euphoric as the Dow Jones, S&P 500 and NASDAQ.
Note as well that the Federal Reserve lowered interest rates this week, adding to the euphoria with investors.
Today we will also look at the long-dated treasury bonds (via etf TLT) and what might have been a key reversal this week. And what does this mean for the key stock market indexes and sectors we follow. See chart and analysis further below.
Let’s begin with one of the most important sectors of the stock market going forward, the Retail Sector ETF (XRT). It looks poised right now.
Nonetheless, we have learned to wait for the evidence rather than anticipate and act too fast.
XRT is in a 10-month price consolidation and its trading range peaks at 80.00. Over that is a bullish breakout.
XRT did close on a new weekly high this past week, surpassing the closing level from the last week of March 2024. Though this is bullish for retail stocks, note that this was the top in March… hence patience still please.
But, with a interest rate drop, new administration, the promise of “fixing” the economy, it is the consumer that must buy (literally and figuratively), into the promises.
So, for now, my main focus is the $80 mark for the Retail Sector ETF (XRT).
For the Russell 2000 ETF (IWM), the look is a bit different. On new 2024 highs, IWM is not quite clear of the all-time high made in 2021.
However, I am less concerned about that and way more concerned about XRT and what that does in the coming days and weeks.
I still find the Biotechnology Sector ETF (IBB) intriguing.
With a new weekly close high for 2024 (and highest close since 2022), IBB looks great after 4 and ½ months of consolidating.
The Medical Devices ETF (IHI) also looks amazing.
And the Semiconductors Sector ETF (SMH) is strong and never really weakened to any disturbing point.
$260 remains the price level to clear. Yet the whole chip space is hardly my first choice, or even 2nd or 3rd as far as the next important ETF to rally.
Now let’s look at long-dated treasury bonds via the 20+ year treasury bond ETF (TLT).
After the September rate cut, the long bonds reacted initially well, and then proceeded to sell off as yields rose.
Now, after this week’s interest rate cut, yields softened again and the TLT left a reversal bottoming pattern.
While the Real Motion momentum is nothing to write home about and the performance versus the benchmark remains risk on for the market, should yields soften more, it could be helpful to XRT, IWM and IBB.
So, keep watching.
And how about Bitcoin. As we have predicted, after the 4-year halving, Bitcoin rallies late October.
Is the bitcoin rally because of Trump? That didn’t hurt. Yet I believed this would happen regardless.
If 74k holds, we are looking at 90k next target.
Circling back to the next member, Transportation IYT, told us before anyone else that this rally was coming when the price plowed above 71.00.
The good ole Dow theory.
So now, IYT is on new all-time highs and while other ETFs have yet to get there, we cannot be bearish with a strong transportation sector.
Finally, my favorite ETF, Regional Banks (KRE).
I purposely condensed the chart to show you the action from March 2023, when KRE crashed.
KRE is back to the scene of the crime at the 65 level.
Above there, we see 75 area as the next resistance.
Now, can the whole kit and kaboodle fall apart? Of course.
But there will be signs. Here are the top 5
- An island top or huge reversal day on high volume in any of the outperformers
- One sector (most likely Granny) will fail to take out the range high and reverse.
- Yields scream higher again
- CPI (this coming week) comes in way hotter than expected
- Full scale war-unlikely but has to be mentioned
Nevertheless, for now, all systems are go and you have a blueprint to follow for this week.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
