Why The Transports ETF Breakdown May Not Matter

Today began on a down note presumably due to concern that comments President Trump made last night suggested that raising the debt ceiling may be at risk.

After the market opened lower it didn’t have any decisive follow through up or down.

After a strong day like yesterday, it’s nice to see follow through to confirm the bulls strength, and that was certainly lacking today.

As mentioned in yesterday’s commentary, the first key level to watch that would suggest that Tuesday’s up move was a one hit wonder, is Tuesday’s low. The stocks, and ETFs that are closing below that level are suspect.

While the general market action was quiet, and not worthy of much analysis, there are several area of the market that had interesting moves.

The most notable move today was the free fall in the IYT. Its 1.3% decline was not extraordinary in magnitude, but its close below key support is very bearish technically.

Looking under the hood of IYT, however, you’ll discover that its decline is a result of the airlines stock getting hammered. The railroads (i.e. NSC, KSU, UNP) and shippers (i.e. FDX, UPS) were weak, but remain in much better shape technically than the airlines.

The free fall in the airlines be seen by the airline ETF (JETS) illustrated below.

The transportation sector is considered a key market bellwether so its breakdown can be viewed as an ominous sign.

I would not dismiss the IYT breakdown completely, but until the shippers and rails follow the airlines lower, the IYT may not be as bearish for the whole market as it looks right now.

Other interesting areas of the market included…

The semis (SMH) which traded over Tuesday’s high suggesting tech is trying to resume its leadership role. Unfortunately, it was not strong enough to be convincing.

IBB, biotech also held up well today, consolidating near yesterday’s high.

Coal (KOL) broke over a key post-election resistance level. You can read more below.