Will Grandma Retail Whip This Bull Market Into Shape?

Sometimes the market takes a day to let reality sink in.

For example, yesterday I highlighted the counter intuitive price action of the TLT’s having a big down day while two other interest rate sensitive sector ETFs, XLU and IYR experienced big up days.

Today, TLT fell again, and this time IYR and XLU both had big down days as we’d expect. Had the TLT’s reversed and gone higher today, I suspect the IYR and XLU would not have sold off.

My point is that markets often take a day or two to react to new price levels or shifting dynamics. As a trader, if you’re not looking out for this, you’ll easily feel fooled when good charts turn bad or vice versa.

These two negative sectors were the only sectors down in our sector summary table today so there rally today was nice and broad.

And today’s most interesting action was in what rallied, not what fell.

For the second day in a row the S&P 500 (SPY) has been the index breaking out while the DIA and QQQ and IWM only rallied much less convincingly.

This divergence is a result of the interesting moves in the market today, which came the form of big up moves in XRT (retail), IYT (transportation), and KRE (regional banks).

Within the last two weeks, all of these Modern Family members were in the midst of major technical breakdowns. They were the bull market’s problem!

In this column we’ve walked through the steps that identify when breakdowns evolve into head fakes for traders, and all three of these ETFs have reversed beautifully.

Today they continued to power higher as prior market leaders like SMH and IBB seem stuck.

After their nice multi-day run, they deserve to take a few days to consolidate, but after any consolidation (and certainly if they don’t even pause) if their up trends continue, these are the reasons to expect this market breakout to continue with or without our prior market leading favorites participation.

S&P 500 (SPY) Big breakout continues higher. Look for intra-day support at 248.80, 248.40, and then big level to hold now is 248. Look for support at 247.50. Resistance at 250.