Pee Wee Herman said, “First your mind plays tricks on you, and then you play tricks back.”
In the stock market that means that just when you think you’ve got something figured out, the market will do the exact opposite. (Liberal interpretation)
The $TRAN is starting to look like it is exhausted and may be on the brink of rolling over. It’s now back where it was around the 24th of January. It was only a couple of weeks ago when I said the same thing, and then the transports rallied. But the transports often warn of things to come and this time may be different and if it is then the markets will follow $TRAN south as this index is the leader.
Back around the 23rd of January, IYT/$TRAN gave a ‘sell’ signal in the 60min time frame when the 13EMA crossed down through the 34EMA. That ‘sell’ signal lasted one session.
At the close yesterday, the 13EMA crossed down through the 34EMA on IYT, though it wasn’t by much. Today the 13EMA pushed further away from the 34EMA and IYT broke the rising trend line, as well. For now this is a valid ‘sell’ signal but $TRAN can right itself tomorrow, as it did a short while back when it appeared to be topping, so it’s probably prudent to give $TRAN some leeway for the moment.
Chart courtesy of FreeStockCharts.com
Daily chart of IYT as a proxy for $TRAN. IYT tagged the 20MA today and maybe that’s all it’s going to do and then we’re off to the races again. On the other hand, if the transports don’t bounce tomorrow and instead continue to roll, then the negative influence coming from such an important sector will doubtless bleed over into the other indexes, IMHO, of course.
In other news, $VIX is just a hare’s breadth away from getting a ‘buy’ signal per the 13/34EMA method in the 60min time frame so this needs to be watched tomorrow.
Meanwhile and for the most part, breadth indicators are not backing off from overbought levels. RSI on $SPX daily chart is now close to 75 and is showing high levels of overboughtness. But no sector has yet blinked. Maybe $TRAN will tomorrow.