Mish's Market Minute

Has Transportation (IYT) Confirmed a Warning Signal?


The GameStop (GME) saga continues as a Reddit page known as r/WallStreetBets and its members of small-time traders have pushed GME through another round of all time highs. Their influence and constant stream of messages throughout social media have reached even Elon Musk, who posted a tweet late Tuesday saying "Gamestonk!!"

While the hype has increased the prices of specific stocks like BlackBerry (BB), Nokia (NOK), Koss Corp (KOSS) and more, the general market has gone through a rough day, with all the major indices closing negative. Even more alarming is how the market gave a warning signal in the form of the transportation sector breaking its 50-day moving average. This merits extra caution, as IYT is key a supporter of the market's demand side. Watching for other key sectors to follow along would confirm that its break of the major moving average holds more value.

That is why, along with IYT, we watch the Russell 2000 (IWM), Retail (XRT), Regional Banking (KRE), Biotech (IBB) and Semiconductors (SMH). Together they are called the Economic Modern Family, and they guide us into the best-performing areas, while also alerting us to potential problems.

Currently, only IYT has broken its 50-DMA at 222.64. Its next support area falls on 214.50 or the low of the first trading day this year. Furthermore, while the other members of the family are sitting above their 50-DMAs, SMH has its 50-DMA nearby at 218.95.

Luckily, monitoring the situation through these major moving averages and key sectors gives us an easy way to see if overall support is holding up or breaking down.

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  • S&P 500 (SPY): 370 the 50-DMA
  • Russell 2000 (IWM): Doji day
  • Dow (DIA): Needs to hold the 50-DMA at 303.12
  • Nasdaq (QQQ): Like to see this hold 319 support from 01/08 high
  • KRE (Regional Banks): If can't hold 54, then watch for 52.51 the 50-DMA next
  • SMH (Semiconductors): 218.95 50-DMA
  • IYT (Transportation): Support 214.50
  • IBB (Biotechnology): 157 support area
  • XRT (Retail): In a vulnerable spot sitting so high with IYT breaking down

Mish Schneider


Director of Trading Research and Education

Forrest Crist-Ruiz


Assistant Director of Trading Research and Education

Mish Schneider
About the author: serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision. Learn More
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