Want To See What A Perfect Retracement Looks Like?

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Last night, I showed you all 6 of the Modern Family sectors.

I asked you if, “a rally in negative markets can yield some good short-term profits, where would be the best place to invest some?”

I suggested you start by using relative strength if looking for a rally play.

I went on to say, “The member closest to the 50 WMA with the most neutral slope is Transportation”.

The parameters I gave are:

“Should IYT clear 190 and hold 185-186, then it has the closest trip to its 50-Week Moving Average or 193.75”.

Today’s high in IYT was 194.20.

The closing price is 194.20.

With that, IYT cleared back over the 200 daily moving average and into an unconfirmed Accumulation Phase.

IYT overshot the resistance..nevertheless...

How do we know if this is a great short or the start of a much bigger rally?

We do not know for sure.

At least not yet. The 193.75 level is good for a weekly close, thus patience is fine ahead of Friday’s close.

However, while we wait, the second sector that made last night’s Daily was Retail XRT .

XRT has tested the 200-WMA and held, moved over 46 (must hold) and now we see if this can get to 47.53, its overhead, neutrally sloped 50-WMA.

If IYT fails to clear 193.75 and if breaks below 192.40, the negatively sloped 50 daily moving average, then perhaps our textbook retracement is one for the history books.

If that is the case, do not forget to watch the weakest sectors if looking to short-Biotechnology, Regional Banks and Semiconductors.

The spike up today had a lot to do with Chairman Powell’s statement.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth”.

The market could be very near-sighted.

Any pause in rate hikes sends two messages. First, that the Fed is worried.

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Disclosure: None.

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Gary Anderson 1 year ago Contributor's comment

The Fed also could be worried that worker participation in GDP profit is way too low.

Michele Schneider 1 year ago Author's comment

All around the Fed has to be worried-what to do with rates, could we spark inflation, is the economy really robust or is it too overheated and ripe for a slowdown? I would not want to be Powell..