Over the weekend I wrote,
“Bulls want to see IYT hold above its 50-WMA. Otherwise, we believe IYT can get closer to the 200-WMA, but it will not fail it again.”
As Monday began, the first green day in September, the transportation sector IYT found temporary support.
Through the years, I have seen different members of the Economic Modern Family take the lead.
Typically, when one leads, the others will follow or the very least, will hold up.
What is interesting is that depending on what leads, tells a story about the economy, investor sentiment, and the stock market.
For the first half of 2024, growth and Semiconductors led.
That told us a story that confidence in growth stocks and technology superseded fears of higher for longer interest rates.
Growth in Tech and all the wealth that comes along with it was all anyone cared about.
And of course, all cycles peak. Hence, SMH and many tech stocks sold off.
Since then, in the second ½ of 2024 we now price in interest rate cuts, a slower economy, and an election where both parties want US reshoring.
Is this the reason IYT now outperforms SPY?
Perhaps.
What we do assume is that if Transportation holds up at these levels, a much broader rally with more sector participation is likely.
This, despite the doomsday talk.
The daily chart setup is very interesting.
I love it when the chart tells the story rather than when the pundits tell you their story without consulting the charts.
IYT held both the 50 and 200 daily moving averages.
The phase is accumulation (unconfirmed) as the 200-DMA sits above the 50-DMA. The distance between the 2 moving averages is narrowing, but we need to see the 50 overtake the 200 to turn to a bullish phase.
Secondly, the price remains beneath the July 6-month calendar range high (horizontal green line). So, IYT is better than most of the Family, but needs to prove more.
The Real Motion indicator has momentum improving but not by enough to get too excited.
Finally, the Leadership indicator is the most exciting as IYT strongly outperforms the SPY.
There’s your potential story.
For this week, watch this sector and you will be able to tell your own story based on IYT either pushing higher, or failing last Friday’s low.
ETF Summary
(Pivotal means short-term bullish above that level and bearish below)
- S&P 500 (SPY) 5400-support level
- Russell 2000 (IWM) 210 pivotal
- Dow (DIA) 400 support
- Nasdaq (QQQ) 430-440 level should hold
- Regional banks (KRE) 54 support
- Semiconductors (SMH) 207 the 50-WMA 230 resistance
- Transportation (IYT) Has to hold above 65 clear 67.00
- Biotechnology (IBB) 137 area support 145 pivotal
- Retail (XRT) 73.50 resistance to clear
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) Still very much risk on