Want to See What a Perfect Retracement Looks Like?

Michele Schneider

Last night, I showed you all 6 of the Modern Family sectors.

I asked you if, “a rally in negative markets can yield some good short-term profits, where would be the best place to invest some?”

I suggested you start by using relative strength, if looking for a rally play.

I went on to say, “The member closest to the 50 WMA with the most neutral slope is Transportation.”

The parameters I gave are:

“Should IYT clear 190 and hold 185-186, then it has the closest trip to its 50-Week Moving Average or 193.75.”

Today’s high in IYT was 194.20.

The closing price is 194.20.

With that, IYT cleared back over the 200 daily moving average and into an unconfirmed Accumulation Phase.

IYT overshot the resistance..nevertheless..

transportation etf iyt investing outlook chart big price level test

How do we know if this is a great short, or the start of a much bigger rally?

We do not know for sure.

At least not yet. The 193.75 level is good for a weekly close, thus patience is fine ahead of Friday’s close.

However, while we wait, the second sector that made last night’s Daily was Retail XRT.

XRT has tested the 200-WMA and held, moved over 46 (must hold) and now we see if this can get to 47.53, its overhead, neutrally sloped 50-WMA.

If IYT fails to clear 193.75 and if breaks below 192.40, the negatively sloped 50 daily moving average, then perhaps our textbook retracement is one for the history books.

If that is the case, do not forget to watch the weakest sectors if looking to short-Biotechnology, Regional Banks and Semiconductors.

The spike up today had a lot to do with Chairman Powell’s statement.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth.”

The market could be very near-sighted.

Any pause in rate hikes sends 2 messages. First, that the Fed is worried.

Secondly, that they are willing to gamble on commodity prices rising.

Even with IYT and XRT rally, continue to watch the dollar (declined today), the rates (firmed) and oil, (dropped to another new swing low).

Stock Market ETF trading levels and analysis:

S&P 500 (SPY)  – 270 now support. And it was just last week we were looking at 276 resistance-that is the 200 DMA and 50 WMA-key to clear or not

Russell 2000 (IWM) – Still by far the weakest which is concerning. 160 is to IWM at 193.75 is to IYT. What does that tell us? If IWM can get there, that’ll be the time to go short. And if it cannot get there, under 193.75 in IYT by week’s end, also a place to short

Dow Jones Industrials (DIA)  – 251 the 200 DMA pivotal

Nasdaq (QQQ) – 164.50 now support. If tis cannot close the week out over 170.60, trouble still looms

KRE (Regional Banks) – 55.00 pivotal

SMH (Semiconductors)  – Needs a monthly close over 94.60 now pivotal support

IYT (Transportation) – see notes above

IBB (Biotechnology) – The 200 WMA at 104.75 cleared well. Specs showed up again. Lots of resistance overhead

XRT (Retail) – 45.00 pivotal support with 47.50 resistance

IYR (Real Estate) – Back in the game as long as it holds 80.00

 

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