On Tuesday, the transportation sector (IYT) gapped higher on earnings from one of its top holdings, United Parcel Service (UPS). Beating earnings per share estimates by 6.5%, UPS was able to bring IYT back over both its 200-day moving average and 50-DMA. IYT has now confirmed a bullish phase change as of Wednesday's close over the 50-DMA.
However, while the movement of goods is showing that economic demand is holding, the retail space continues to stumble within its current trading range. If we narrow our focus down to how these two sectors interact with each other, we can look for correlation from demand picking up in IYT to potentially seeing retail companies begin to follow in IYT's footsteps, as consumers order more items thus increasing the movement of goods.
With that said, what are the key areas to watch for each symbol to hold if they support this idea? Looking at the above two charts, first, we can watch for IYT to hold its bullish phase change over the 50-DMA at $267.32. However, if IYT pulls back to digest its large move upwards, it should ultimately hold over the 200-DMA at $262.
On the other hand, the retail space (XRT) is stuck between resistance at $83.29 and support at $75.62. Therefore if, IYT can hold over its major moving averages, watch for XRT to clear its current trading range and hold over $83.29 before looking for the next push upwards.
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ETF Summary
- S&P 500 (SPY): 461.45 to clear.
- Russell 2000 (IWM): 203.55 to clear.
- Dow (DIA): Watching for a second close over the 50-DMA at 355.29.
- Nasdaq (QQQ): Held the 200-DMA at 366.19.
- KRE (Regional Banks): 72.27 pivotal area.
- SMH (Semiconductors): 287.73 resistance.
- IYT (Transportation): Confirmed a bullish phase change.
- IBB (Biotechnology): Watch to hold over the 10-DMA at 129.37.
- XRT (Retail): 83.54 resistance.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
