Is the Stock Market Getting Over the Hump?

Yesterday, we talked about exercising caution when trading on adages. 

Plus, we warned you to be careful not to become too extreme in sentiment. 

Then, I pointed out how the “inside” sectors were outperforming and perhaps suggesting things aren’t as bad in September as the media wants you to believe.

The first chart is SPY or S&P 500.

A few things worth mentioning.

1. SPY sits on its 50-daily moving average.
2. While momentum remains in a bearish divergence, Real Motion shows that today’s move is consolidation. How the price reconciles, brings us back to the 50-DMA holding or not.
3. The Leadership against the Long Bonds or TLT flipped in favor of SPY. Should this remain the case, the market is risk on. Basically, you want to see SPY outperform TLT in a bullish market.

Onto Transportation IYT and how that continued to outperform today.

IYT while failing to clear the July 6-month calendar range high, did have an interesting candle pattern.

Today’s pattern is an inverted hammer doji, which simply means that the opening and closing price were close and when the hammer is on the lower end of the candlestick, it could imply forced selling.

That tells us that IYT remains the key for the rest of this week.

IYT clears 67.50, we are good.

If the momentum begins to fade and it cannot maintain its outperformance against the SPY, we will get more cautious.

(Think TLT versus the SPY.) TLT is a good flight to safety.

Bulls want to see IYT hold above the 2 major moving averages.

Yesterday’s analysis was this:

“MP Materials (MP) reported and announced a huge buyback program. This company mines rare earth minerals.

Another one in a downtrend since April 2022, we like the bullish divergence on our Real Motion momentum indicator.

Therefore, we will watch for a phase change should the price clear back above the 50-DMA (blue line).”

On Wednesday, MP was up around 8%. Timely, huh?

Twitter: @marketminute

The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.