The rally to start the week is quite promising, as once again, Friday’s selloff was an overreaction to headlines.
Yet, for the sake of consistency, the July 6-month calendar range high remains elusive to the strongest sector, Semiconductors .
However, both and s cleared that indicator’s high.
That leaves the market still divided between strong indices versus weaker economic modern family members.
Were the warnings we saw last week a mere blip in the sea of relentless retail buyers’ stock index portfolios? 
What we wrote earlier:
Looking at IYT, Transportation
The picture is different.
Transportation, a huge component of the US economy, shows not only stagflation potential, but also recession potential.
IYT never cleared the July 6-month calendar range high.
The momentum went into a bearish divergence before the price broke down under the July calendar range low AND both the 50- and 200-day moving averages.
I concluded the article with this:
Always look at the weakest link and the strongest link to gauge whether dip buying is the right thing to do or not.
We see IYT says be patient, the worst could yet be around the corner.
While the rest of the Family says maybe Friday was the end of the selloff, should we be concerned about the Transportation (NYSE:) sector?
The updated chart shows today’s bounce, which could look like a mean reversion when you add the Leadership indicator.
Note that the blue line that measures performance against the benchmark cleared the Bollinger band. That is a performance mean reversion.
On Real Motion, we see momentum improving but the red dots remain below both the 50 and 200 daily moving averages.
Should momentum continue to grow, that would be a good sign.
Nonetheless, a better sign would be if the price action can clear not only the moving averages, but also the July 6-month calendar range low (red horizontal line).
Hence, while today was a good day to select the stronger stocks to buy on a dip, the jury is still out on whether the market found a firm footing last week.
Here is the difference between those who trade with YOLO and those who have a strategy: they part ways.
Should IYT roll over, I would continue to think more actively about equities one buys and more defensively on the existing positions.
Plus, I would not forget to watch the long bonds TLT for signs of risk off or on.
ETF Summary
(Pivotal means short-term bullish above that level and bearish below)
- The divergence between growth and value continues to widen
- S&P 500 (SPY) 615 July low to hold 628 pivotal
- Russell 2000 (IWM) 215 July low to hold 222 close resistance
- Dow (DIA) 440 must hold now
- Nasdaq (QQQ) 562 key pivotal area
- Regional banks (KRE) 59 the July low and very pivotal
- Semiconductors (SMH) 280 support and 293 the place to clear
- Transportation (IYT) 66 is key support and move over 68 better
- Biotechnology (IBB) 133 is a good pivotal point and looks promising
- Retail (XRT) 78 big support must get thru 80
- Bitcoin (BTCUSD) 116 back to support 118 closest resistance to clear
Educational purposes only, not official trading advice.