We started this year looking at the monthly charts and the 2 moving averages that depict business cycles.
Back in February, we wrote:
All in all, the key sectors (retail, transportation) have more to prove, especially by clearing the 23-month moving average or 2-year business cycle. This is a significant level, as these sectors proved recession was held off when they both held the 80-month moving average or their 6-7 year business cycle low. So, after 2021 was a huge up year and 2022 was a huge down year, 2023, if it clears a 2 year cycle, that looks way better for the economy and market.
Subsequently, Retail (XRT) never cleared the 23-month MA, while Transportation (IYT) did. That prevented us from feeling too confident in a sustaining rally with retail weak.
However, as you can see, the picture has changed.
Retail (XRT) threatens the 80-month moving average once again. Transportation (IYT) has failed the 23-month in September. That gives us two reliable indicators for moving ahead.
Can Retail hold the 80-month MA? If not, here comes recession.
Or can IYT return over the 23-month, engendering more confidence?
Perhaps the small caps and NASDAQ index can shed more light. Small-caps (IWM) fell below the 23-month MA after spending only one month above it. The failure in August to hold above the blue line or 2-year business cycles is a pretty clear sign the higher rates are having an impact on the Granddaddy of the US economy.
Conversely, NASDAQ QQQ broke above the 2-year business cycle high in May 2023. Price ran from $328 to $388 in 3 months as AI and growth have been the winners for a long time. This move lower can see a retracement in QQQ back to 328. After that, so much depends on what happens with IWM, XRT, and IYT.
Nonetheless, one thing is safe to presume. If XRT keeps recession at bay and IYT can rebound back into some expansion, growth will continue to outperform. And if XRT indicates a recession is coming, and IYT plus IWM fail their 80-month MAs, QQQ may still outperform. But we would wait for a move down to 275 as the better buy opportunity in that index.
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In this Q3 edition of StockCharts TV’s Charting Forward 2023, Mish joins a panel run by David Keller and featuring Julius de Kempenaer (RRG Research & StockCharts.com) and Tom Bowley (EarningsBeats). In this unstructured conversation, the group shares notes and charts to highlight what they see as important considerations in today’s market environment.
September 29: Live Coaching
October 2: Schwab, The Watch List
October 4: Jim Puplava, Financial Sense
October 5: Yahoo! Finance
October 12: Dale Pinkert, F.A.C.E.
October 26: Schwab at the NYSE
October 27: Live in-studio with Charles Payne, Fox Business
October 29-31: The Money Show
Weekly: Business First AM, CMC Markets
S&P 500 (SPY): There are multiple timeframe support levels round 420-415.Russell 2000 (IWM): 170 huge.Dow (DIA): 334 pivotal.Nasdaq (QQQ): 330 possible if can’t get back above 365.Regional Banks (KRE): 39.80 the July calendar range low.Semiconductors (SMH): 133 the 200-DMA with 147 pivotal resistance .Transportation (IYT): 225 next support.Biotechnology (IBB): 125; if clears, impressive.Retail (XRT): 57 key support.
Director of Trading Research and Education