The Rally Trumpets An Appealing Yet Solemn Tone

A Trumpet, in the hands of an accomplished musician, can be played to sound like the penetrating cry of an elephant. How ironic that the elephant in the photo is a wooden shell of a prehistoric woolly mammoth, or another version of our Rallysaurus. The rally is blowing its own horn in the face of the relentless bull market. Some of the tunes resemble the sounds of cool jazz. While others can make even an apathetic listener cry. Over the course of last week, several instruments changed directions, hence, phases.

The Russell 2000, confirmed a Bullish phase. Regional Banks (KRE), jumped from a Distribution to Warning to a Bullish phase. Biotechnology (IBB), improved from a Distribution phase, to a confirmed Warning phase. Yet, our Rallysaurus’ melody ultimately resonated with a sector that had nearly gone extinct. As we enter the short holiday week, who hears the trumpet cry and who hears a stentorian sound? Transportation (IYT) could not close the week out over 172. It remains in a weak warning phase as the slope on the overhead 50 daily moving average is positive. However, with an inside trading day on Friday and a red close, IYT wept at the sound of the Rally’s trumpet. Should IYT’s price stay below 172-173, we will be watching to see whether it can hold 168.50.

With a stentorian and triumphant tone, Granny Retail (XRT) confirmed the Recovery Phase and then struck a high note into an unconfirmed Accumulation Phase. After tracking what looked like slow death to brick and mortar this year, the potential double bottoms from August and then just 2 weeks ago, will look a lot better should XRT clear 42.00. In commodities, gold took center stage on Friday. GLD picked up the trumpet and blasted a warlike note. Warlike because in the face of the U.S. Dollar, which closed out the week below the key 200-week moving average, the economy still faces a possible dilemma not easily resolved. This Thanksgiving, bulls should give thanks for this spectacular rally. Nevertheless, if Gold is our emerging Miles Davis, we could see commodities get a high level of recognition while equities move to the shadows. “Stagflation” is a tune not trumpeted since the 1970’s. The Federal Reserve, should stagflation occur, will require Miles Davis’ cool improvisational skills.