Stock Markets Analysis & Opinion

3 Key Market Indicators to Watch During Uncertain Times


For consistency, here are the key go-to’s during an uncertain time in the market:

  1. The next direction of long bonds (iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT))
  2. The next direction of the small caps and retail sectors (iShares Russell 2000 ETF (NYSE:IWM) and S&P Retail ETF (NYSE:XRT))
  3. The next direction of commodities, all of them, but particularly the agricultural ones, oil, and precious metals (Invesco DB Agriculture Fund (NYSE:DBA) and Invesco DB Commodity Index Tracking Fund (NYSE:DBC)).

There are other relationships to watch like our risk gauges (all still risk on).

And of course, there are stocks that will outperform like what we saw on Monday in defense companies.

Overall, though, and to simplify the macro, these top 3 points should help a lot.

1. Small Caps and Retail Stocks

The first chart is the monthly charts of small caps and retail (IWM) and XRT).IWM-XRT-Monthly Chart

The 80-month moving average (green line) is a longer-term business cycle of about 6-7 years.

Besides the blip during COVID, IWM has not BROKE that 80-month MA since 2010. XRT sits right above the 80-month.

To remain bullish, those lines must continue to hold.

2. Long Bonds

TLT-Daily Chart

We have seen lots of mean reversions and reversal-looking bottoms in TLT.

They have been fake-outs.

What we do not want to see is TLT outperform SPY (Leadership indicator remains risk on as long as SPY outperforms).

Furthermore, we can see TLT rally along with SPY if SPY continues outperforming.

The best signal for watching a TLT rally is the 10-DMA or cyan line.

TLT has not been above that since September 1.

A strong rally in TLT where SPY begins to underperform could signal risk off. Moreover, it could negatively impact equities as fears of recession or hyperinflation kick in.

3.  Commodities

DBA-DBC-Daily Chart

In the commodities world, DBA and Invesco DBC offer a good way to assess the spectrum of raw materials and inflation.

We like this as commodities are a big focus during wars and geopolitical stress.

Also this week, we will see PPI and CPI numbers come out.

While oil, gold, precious metals, and miners were up today along with some soft commodities (sugar, coffee), grains were red.

DBA on the left is underperforming SPY and in a caution phase trading under the 50-DMA (blue).

Could DBA rally? Sure. Over 21.80 we would begin to think more bullish in agriculturals.

DBC on the right, more oil and precious metals focused, also underperforms the SPY. That is surprising and supports a risk-on environment.

Through 24.75 that picture changes.

Should oil and PMs start to outperform the SPY, then the inflation conversation begins to dominate.

Hence, right now, risk on prevails.

Commodities strengthened after they became oversold. But they remain weaker than the SPY.

And long bonds, are also experiencing buying-but too soon to know if yields have topped. And if they have, is it for the right reasons?

ETF Summary

  • S&P 500 (SPY) 435 resistance
  • Russell 2000 (IWM) 177 resistance
  • Dow (DIA) 338 resistance
  • Nasdaq (QQQ) 368 resistance
  • Regional banks (KRE) 39.80 -42.00 range
  • Semiconductors (SMH) 150 resistance 143 support
  • Transportation (IYT) 237 resistance 225 support
  • Biotechnology (IBB) 120-125 range
  • Retail (XRT) 57 key support if can climb over 61, get bullish


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