Mish's Market Minute

Caution All Around with Transportation Market's Last Hope

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On Wednesday, the market continued the prior days' sell-off. This has placed the overall market trend in a pivotal area as more sectors begin to look weak.

This can be seen in Mish's Economic Modern Family, which consists of one index and 5 important sectors. Currently, the Russell 2000 (IWM), Retail (XRT), Semiconductors (SMH, and Regional Banking (KRE) are in cautionary phases, with the Biotech space (IBB) sitting in a distribution phase.

A cautionary phase is when the price is under the 50-day moving average but over the 200-DMA. This phase normally follows a bullish phase, where the price is still over the 50-DMA as seen in the transportation sector (IYT). Additionally, because the transportation sector is over its 50-DMA, it is the last sector in a bullish phase within the Family. This does not look great for the overall market picture, and could be showing more chop and a bigger pullback is in form.

With that said, a cautionary phase does not mean we are taking a bearish stance. Many times, a symbol can trade back and forth between phases before continuing higher or breaking down. A good example is how IWM has consistently traded between a bullish and cautionary phase for the past 2+ months. Moreover, we can watch how each Family member performs and if the ones that are still near their major moving averages can recoup back over the 50-DMA.

Recently, the transportation sector has been the shining star of the bunch. However, can it still hold up if most of the Family members are heading lower?


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ETF Summary

  • S&P 500 (SPY): 404 the 50-DMA
  • Russell 2000 (IWM): Next main support 208
  • Dow (DIA): 333.31 support area from the 50-DMA
  • Nasdaq (QQQ): Confirmed a cautionary phase with second close under the 50-DMA at 352.88
  • KRE (Regional Banks): Broke support at 67.87
  • SMH (Semiconductors): 216.14 next support area
  • IYT (Transportation): 260 support area
  • IBB (Biotechnology): Second close under the 50-DMA at 146.94 will confirm a distribution phase
  • XRT (Retail): Needs to get back over 88.47


Forrest Crist-Ruiz

MarketGauge.com

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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