Recently, our proprietary momentum indicator RealMotion, seen in the chart above, has shown a divergence in momentum and price for the transportation sector (IYT).
While the price of IYT currently sits above the 50-day moving average, it has broken the 50-DMA on momentum. However, the warning only holds weight if the price also confirms by breaking down below its 50-DMA. Then, both momentum and price would be on the same track.
Another interesting note is that Transportation was the only member of the Economic Modern Family to break its 50-DMA on momentum. As a reminder, the Family consists of key sectors and one index to bring a clear picture of the health and direction of the market.
- Grandad Russell 2000 (IWM)
- Transportation (IYT)
- Granny Retail (XRT)
- Prodigal Son Regional Banks (KRE)
- Brother Biotech (IBB)
- Sister Semiconductors (SMH)
If any of the Family members begin to significantly diverge from the pack, we note that as either a caution or hopeful sign. Sometimes, it is just typical sector rotation, as we saw last July when money began flowing into Retail.
Having said that, all members are currently in a bullish phase. This means their prices sit above the 50-DMA and the 50-DMA is over the 200-DMA.
So why worry about IYT if every member is bullish? In the past, the transportation sector has acted as underlying support for the overall market. Charles Dow knew of transportation's importance to the economy and the market as he created the Transportation index 200 years ago. Dow told us that, when the movement of goods is steady, everyone else prospers. In other words, the demand side is robust. Therefore, if transportation begins to weaken, it is possible others could soon follow, as that would signal low demand and thereby a weaker economy.
Staying cautious though, does not mean we have to stay on the sidelines. We have been watching many interesting new tech stocks that can give great opportunities going forward into the year. Some of those you can find below.
Here are 2 videos from Friday (January 22) where Mish takes you through actionable trades to help you profit from emerging trends in 2021.
In this week's edition of Mish's Market Minute, Mish breaks down 10 big sectors: Manufacturing/Industrial, Big data, Ag Tech, Retail, AI, Space, Health, EVs, Cybersecurity and Crypto. She shares an astounding list of 25 charts, with a heavy focus on new technology stocks and gives you her top picks in each sector with actionable information.
Mish also hosted the Friday edition of Your Daily Five, where she covered the hot topic of 3D printing. There are a bunch of stocks in the space that are showing signs of strength and in this video, Mish examines 10 instruments in 7 minutes.
Whenever you're ready, here are 3 ways I can help you reach your trading goals...
- Stay one step ahead of the market with my daily market analysis, Mish's Daily.
- Get the foundational building blocks of my trading strategies from my book Plant Your Money Tree: A Guide to Building Your Wealth and accompanying bonus training.
- Trade with me and take your trading the next level by following my real-time trading ideas as a member of my premium services.
- S&P 500 (SPY): 384.95 to clear. 375.50 support area
- Russell 2000 (IWM): 208.26 Support. Near all time highs
- Dow (DIA): Tested the 10-DMA at 310.37. 306 support
- Nasdaq (QQQ): Inside Doji Day
- KRE (Regional Banks): 55.92 next support. 58.26 the 10-DMA
- SMH (Semiconductors): 232 support area.
- IYT (Transportation): Watching 226 to hold or the 50-DMA at 222
- IBB (Biotechnology): 161.42 the 10-DMA
- XRT (Retail): New all-time highs. 71.30 support.
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
