Yesterday I drew ‘hidden’ lines on the charts of the Modern Family to highlight the transition that was occurring from bearish to bullish sentiment.
On Friday that shift continued as they all moved higher. Those lines will still be important support if the market sells off in the short-term, but now there are more important lines in sight.
Remarkably, the Modern Family is now very much in synch, and as a result, there is chance that they could all break out of their respective consolidation patterns together.
Additionally, based on our proprietary Real Motion indicators, Grandpa (IWM) is more ready to rally than I believe most people think.
The chart of the Modern Family below illustrates how all of the members other than SMH are at or near their respective consolidation breakout levels.
As a result, this is either a great time to expect the market to stop and reverse, to or accelerate higher. You don’t need to decide what the charts are going to do next.
As I suggested yesterday…
“If they move higher in unison, you may want to give the bulls their chance…”
SMH is already over its key level. If several other members follow suit, then the stage is set for a new move higher. As I suggested earlier, IWM is also stronger than it has been in some time based on our Real Motion indicators.
Real Motion measures the trend in momentum and this trend is not always in alignment with the trend in price. When Real Motion’s trend contradicts the price trend, the price can struggle or even reverse.
In the chart below, Real Motion is measured on a 10-day (magenta) and 50-day (blue) basis. The same time frames are displayed on the price chart.
The dots on Real Motion are 1-day measures.
As illustrated by the red circle, in March through most of June the 10-day Real Motion measure was under its 50-day measure. In this condition it’s not surprising that IWM had trouble rallying in April and then sold off in May.
You can see by the green circle that a more bullish Real Motion condition is developing. If IWM continues to trend higher, Real Motion is likely to do the same given its current trend. So with Real Motion and the price trend now in synch, IWM is in a much stronger position than it was earlier in the year.
If you have Real Motion, I’d encourage you to look at the Modern Family with this perspective. XRT and IBB also have very interesting conditions.
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