On Monday, we looked at and analyzed the Retail Sector (XRT) in detail.
And we determined that Monday’s action is still within the range of the huge sell off 2 weeks ago.
Plus, should XRT struggle to close out the month back above the 23-month moving average, it will indicate the consumer and consumer spending is in a 2-year business cycle contraction.
The Retail Sector often works in tandem with the Transportation Sector ETF (NYSEARCA: IYT).
The Transportation sector ETF (IYT) “daily” price chart shows the following
- Price is under all indicators-January calendar range, 50 and 200-DMAs and in a distribution phase
- Transportation grossly underperforms the SPY
- Real Motion is in a death cross and bearish divergence to price.
- IYT did not have a clean bottoming formation.
The weekly chart while struggling, in contrast to XRT Retail, IYT remains above the 200-WMA (green).
Note the mean reversion on the weekly Real Motion indicator. But also note the bearish diversion with the 200-DMA above the 50-DMA (blue).
Can IYT help XRT relax?
Or will the current economic slowdown seen in the retail sector further drag down Tran?
Looking at the monthly chart…
We determined that XRT had to clear back above its 23-month moving average by March 31st or it closes out the first quarter in economic contraction based on a 2-year business cycle.
You can see here why it is so important to watch the monthly chart in IYT.
While Retail sits below the 23-month MA (blue), IYT holds it by a slim margin.
2 Key members of the Economic Modern Family are at a precipice.
IYT must hold around the current levels, which could help XRT relax.
And it could just as easily close out the month under the 23-month MA, in which case you will have the consumer and the measure of how robust goods and people are moving both flashing a significant warning.
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.
