Separating The Stock Pickers From The Trend Followers

After taking the pulse of the key sectors where we saw that many were in bullish phases, today, the divergence among the key sectors expanded.

Transportation IYT, for example, went from bullish to an unconfirmed Distribution phase.

On the other hand, Biotechnology IBB improved back into an unconfirmed Accumulation phase.

And while the other economic Modern Family members remained in their current phases, this increased divergence is puzzling and a bit troubling.

If the market could talk it might say, “We are concerned about the economy slowing down. We are hopeful that the Federal Reserve cuts the interest rates as a result.

If that does occur, tech companies will continue to buy back their own stock. However, the meat of the US economy will still have tariffs and a global slowdown to worry about.”

That clears it up for us, doesn’t it?

Tomorrow, the Fed Chair will testify in front of Congress.

What if he had a chart of the Economic Modern Family to refer to?

(Click on image to enlarge)

Top left is IBB. Note how it cleared back over the 200-DMA. That makes 107.90 the key place to hold. Plus, there is lots of resistance to clear.

In the middle top is Regional Banks KRE. That too improved by rising in price above the 50-DMA. A relatively sloppy chart, KRE must clear and hold above 53.70 or the 200-DMA.

Far left is Transportation, the trouble spot. Should IYT fail to clear 185.96 and 186.62 respectively, I’d take that as fair warning.

Transportation or demand side has served us well as a precursor to what could happen next.

On the bottom left is Semiconductors. SMH (along with IBB) saw buying. Significant?

As far as sector rotation, good for those who follow the money.

As far as a measure of the US Economy? Not so much.

Bottom middle is brick and mortar retail XRT. Although the price sits above the 50-DMA, the slope is negative on the MA. Until it clears/closes over 43.15, not very impressive.

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