The divergence within the stock market continues. We can see this with the Russell 2000 (NYSEARCA:IWM) continuing to struggle versus the other major stock market indexes as well as with market breadth (new highs / new lows). More on that below.
Let’s look at the key price levels across the major stock market indices and ETFs for Wednesday, October 3:
S&P 500 ETF (SPY) 291.00 pivotal. A move under should bring out more selling.
Russell 2000 ETF (IWM) 164.07 was the low on July 30th. If stops going down and can get back over 166 area, that would help the bulls.
Dow Industrials ETF (DIA) 267.60 is pivotal. 265.50 is now support to hold.
Nasdaq 100 ETF (QQQ) We won’t know if this is a double top unless this breaks down under 181-so for now, no reason to panic.
Regional Banks ETF (KRE) Possibly a blow off bottom-considering the oversold factors – need proof.
Semiconductors ETF (SMH) Could not clear 108 and now with the 50 DMA at 106. 50, this could be in a make or break situation
Transportation ETF (IYT) Unconfirmed warning phase-giving it room to 202-but if this cannot find buyers to take it back over 205.35, trouble
Biotechnology ETF (IBB) 120 pivotal
Retail ETF (XRT) Blew below the 50.00 now the resistance
The Hindenburg Omen, prompted by Jim Miekka in 2010 after the market crashed, pops up for us today.
Basically the prediction is that when the daily number of new 52-week highs and 52-week lows are both greater than a percentage threshold, a crash ensues.
“The signal typically occurs during an uptrend when there are still many new highs, but a growing number of new lows suggest that the market is becoming bearish and indecisive.” Investopedia
Although the Omen has not been very accurate in the recent past, like a broken clock, that looks like it could get its chance to finally tell the correct time.
The Dow Industrials went on to make new all-time highs Tuesday.
NASDAQ, which we speculated could be in the midst of putting in a double top, tried for the highs again, closing near the intraday lows.
NASDAQ and the Dow Industrials are the good news.
Can our man continue to keep his balance while juggling a split ladder? (photo from the Collection of Arnold Lieberman)
Yesterday, we went through the economic Modern Family.
We also focused on the dollar, interest rates, commodities (especially oil) and the transportation sector.
What we saw was that The Russell 2000 (IWM) declined by over 1%, broke a key moving average, yet remains well above the 50-week MA.
Tuesday IWM declined again by over 1%. All this while the Dow made a new high.
Brick and mortar Retail (XRT) fell by over 3%.
Semiconductors (SMH) went from green to red.
Biotechnology IBB, is working its nasty reversal topping pattern.
Regional Banks (KRE) look pathetic.
The go-to Transportation (IYT) has now entered an unconfirmed warning phase.
In other words, the Modern Family is sick.
Now, looking at commodities, the agricultural index DBA rallied, as did the metals, sugar, and coffee.
The rates softened a bit but not by any substantial levels. And the dollar continued to gain, now heading into resistance as measured by UUP (ETF) at 25.40.
The Omen predicts the man will drop the top half of the ladder and like Humpty Dumpty, all will fall down.
Unless IYT and IWM play some serious catchup, be wary of any fiery airships heading for a crash.
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The authors may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
