On August 22, I wrote a blog called “Can the Market Live on Canned Rations?” In it I wondered about the threat of the transportation sector: “Transportation IYT, made a new all-time high, but closed beneath 206.90 and the older ATH (all-time high) at 206.73.”I went on to say, that “Transportation can either blast off from yesterday’s high or put in a very neat double top.”
On 8/22, IYT broke the first line of support at 205.25. IYT also posted a topping pattern based on a new high followed by a high-volume break of the prior day’s lows. At that point, I wondered, “If we are nuclear trading scientists handling volatile materials or markets, what should we have in our survival rations?”
In September I wrote, “Whilst investors hold out their hands to feed the bull, the bull’s crown serves as a cautionary tale.” Since then, we have looked at the NASDAQ double top, Semiconductors closing under the 50-week moving average for the first time since 11/16, plus, Regional Banks also closing under the 50-WMA for the first time in a year.
More recently, we looked at the divergence between the Russell 2000 and the Dow. I asked you to think about the higher interest rates and how that would impact your portfolio.
And, as recently as Tuesday night, we looked at what the Transportation sector via IYT breaking down meant for the eerily chill bulls. I do not mean this to be a “I told you so.” Rather, I prefer to think of this as a lesson for those who thought “generational bottom,” or use a passive investing (buy and hold) style of trading.
With all that said, over the weekend I ended the Daily with, “Commodities-that historically low ratio between equities and commodities”-time to watch for that to reverse. I’m an optimist. And a commodities trader at heart.
What can we look for now?
The dollar and the rates will continue to factor into commodity prices. And not all commodities are created equal.
