The transportation sector has had a turbulent 2020, and early optimism this year has all but vanished already. Mish Schneider explains what the most recent signs could mean.
The transportation sector (see the iShares Transportation Average ETF [IYT]) has entered back into a bullish phase.
A bullish phase is when the price is over the 50-day moving average (50-DMA), and the 50-DMA is over the 200-DMA.
IYT is now back in line with the rest of its economic family members who, as whole, give a clear way to see market direction.
Here is a quick rundown of where the other Family members sit.
Grandad Russell 2000 [IWM] made all-time highs.
Prodigal Son Regional Banks [KRE] is sitting at monthly highs with resistance to clear at $59.86.
Big Brother Biotech [IBB] made new all-time highs.
Sister Semiconductors [SMH] sits in the middle with highs at $246 and support at $223.72.
Each member was specifically chosen to show a different but essential piece of the market. But, knowing what to watch is 10 times more useful when paired with a basic guiding tool.
That is where the simple moving averages come in.
Right now is a perfect bullish situation with all the family members sitting above their 50-DMAs. Even though IYT triggered a warning when it broke its 50-DMA, it soon recovered.
The main point is to watch if members are moving together or breaking off into their own direction based on their price relative to their moving averages.
This is not only useful for key sectors, but also useful when viewing specific stocks. You can easily see strength or weakness by what phase a security is in.
Circling back to the transportation sector and its recent turn back to bullish, this becomes a focal point for whether or not this rally sustains.
IYT, simply put, must hold its 50-DMA or bullish phase to keep the market strong.
This article was originally published on MarketGauge. With over 100 years of combined market experience, MarketGauge's experts provide strategic information to help you achieve your investing goals.
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