The Market’s Shaky House Has Good Bones

Before I begin, I hope some of you took advantage of last night’s report on shorting Netflix.

NFLX began the session lower and proceeded to sell off. NFLX stock closed lower by over $22.00.

When I wrote “the slope on the 50 daily moving average is negative. That means the warning phase could escalate to the downside”, I didn’t expect instant gratification. The power of the charts and phases!

With that said, the rest of the market looks a bit like the dilapidated house.

Nasdaq, in particular, became less inhabitable. Yet that’s ok for those of us who look at the key index and five sectors of the economic Modern Family.

While QQQ hold the top momentum stocks, it’s the Russell 2000 (IWM) that more accurately represents the U.S. economy.

Today, IWM came close to testing the 170 level, the place it broke out from mid-August.

Subsequently, it rallied, closing over a key fast-moving average.

But that’s not the best part of the story.

Do you condemn a house when the deck crumbles while the foundation remains intact?

What is the market’s foundation?

First off, aside from the Family, the S&P 500 held the runaway gap. As stated in the ETF commentary, “as long as it holds 287.75, we are good”.

Secondly, Transportation (IYT) closed green and right near the 205.25 level I have focused on.

205.25 is the low of the day when IYT made new all-time highs on August 21st. I would not say that we should start moving our furniture back into the market’s house just yet, however.

Nevertheless, we can at least continue to find shelter under the intact roof.

Granny Retail (XRT) still has the potential to do some home repairs. A move and close back over today’s highs would be a big help.

Another frequent mention of where to look for speculative interest is in Biotechnology (IBB.) As long as it holds 120, we can cautiously enter the house.

Regional Banks (KRE) are happy with the rising rates. In fact, although it will cost more to borrow money for repairs, any new savings will finally collect some interest.