Over the weekend I wrote about small caps and retail or the Granny and Gramps of the Economic Modern Family.
The third “inside sector” of the US economy is transportation.
IYT is also a member of the Family and as such, a reliable way to assess the health of the economy and the stock market.
With the market experiencing a dose of reality on interest rates, we still believe that current rates are not the worst news for the market, depending on where you look.
Regardless of supply chain issues, for now, IYT is holding up well.
Furthermore, as a great gauge to measure overall demand, what IYT is telling us is that demand is solid and honestly, a reason to doubt any recession calls by economists.
It’s why we love the Family-they keep us on the right side of the market.
Could IYT fall? Of course. Inflation would be a big reason for a fall.
To date though, the new round of inflation we expect has yet to materialize.
So, we look here for clues on the market’s next moves this month of February, which many say should be negative for stocks.
Looking at the Daily chart of IYT, we can determine a lot from the price, but also from our ACP plug-ins, featured on our website as well as on Stockcharts.com.
The price is above the 50-DMA so the bullish phase is intact.
Plus, Monday is turning out to be an inside day to Friday’s range.
We will watch for a move above Friday’s high as a great sign for this, the Family and the market.
The calendar range tells us that IYT is above the highs which is generally very bullish.
The Leadership has a story to tell in that it is well underperforming the SPY.
With growth stocks still in rocket mode, we really want to see IYT at least catch up to the SPY for the best bullish scenario.
Momentum or Real Motion tells us that there is a slight diversion between momentum and price. IYT’s momentum sits on the 50-DMA, while price is a good way above that 50-DMA.
Overall, this sector is what is keeping us from thinking a much bigger correction is in store, UNLESS, IYT breaks down under the 50-DMA or around 257.
ETF Summary
- S&P 500 (SPY) 490 support
- Russell 2000 (IWM) 195 pivotal, 190 support to hold
- Dow (DIA) 385 pivotal
- Nasdaq (QQQ) 425 support to hold
- Regional banks (KRE) 45 support
- Semiconductors (SMH) 195.90 the all time high which it cot close to but could not clear-if turns down, 184 is support
- Transportation (IYT) Inside day. Watch 259-266 range to break up or down
- Biotechnology (IBB) 135 pivotal -like this sector but has more to prove
- Retail (XRT) 70 pivotal with 67-68 key support