Okay, the cartoon and me in character as the Transportation Sector (IYT) might appear a bit silly, but the content and its importance to the overall stock market is hardly so.
Combining the technical signal in the Transportation Sector (NYSEARCA: IYT), along with the classic inside day in the S&P 500 and the Dow Industrials, is exciting to tech nerds like Tran (and me.)
The alignment you are about to see is nearly textbook perfect.
How can something so complicated be so simple?
First off, what is an inside day?
That is when the trading range of the current day is within the trading range of the prior day.
Furthermore, it represents a pause in the action or uncertainty of next direction.
Such is the case with the S&P 500 (SPY) and Dow Jones Industrials (DIA).
The chart of IYT indicates a breakdown under the 200 DMA (green).
However, although IYT did not have an inside day, it did close above the prior day’s lows. It also had 2 doji days. That’s when the opening and the closing prices are virtually the same.
Another indication of a pause or uncertainty.
So here’s the easy part.
Should IYT fall below 187.93 and the SPY breaks 277.48 (yesterday’s low), don’t overthink. The market wants lower.
On the other hand, if IYT clears 189.96 (yesterday’s high) and the SPY can hold above 279.59 (also yesterday’s high), keep your bull or pilot’s hat on.
S&P 500 (SPY) – Inside day, which lines up perfectly with a break of the 10 DMA should 277.48 fail.
Russell 2000 (IWM) – 157 pivotal all around. And especially on a weekly close. With that said, a close under 156.50 should bring in more selling.
Dow (DIA) – Inside day. A break of 258.77 corresponds with a break of the 10 DMA
Nasdaq (QQQ) – Missed an inside day by one tick. Yet, a break of 171.76 is noteworthy since it will break prior day low and the 200 DMA.
KRE (Regional Banks) – A break of 55.98 also breaks the 10 DMA and shows its inability to clear the overhead 50-WMA.
SMH (Semiconductors) – Inside day here too. Closed under the 10 DMA but if breaks under 102.22, should see 101 area.
IYT (Transportation) – Keep 189.61 in your mind as the ultimate weekly pivotal level to hold or not
IBB (Biotechnology) – 109.87 the pivotal point. 115 major resistance
XRT (Retail) – 44.62 pivotal support with 46.80 major resistance
The authors may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.