New Highs in the S&P 500 so Why Not in Transports?

October 28, 2019

Mish's Daily

By Mish Schneider


blankFrom 1821 until 1846, the Santa Fe Trail was a two-way international commercial highway used by both Mexican and American traders.

Then, in 1846, the Mexican American War began, and a few months later, America’s Army of the West followed the Santa Fe Trail westward to successfully invade New Mexico.

After the U.S. acquisition of the Southwest ended the war, the trail helped open the region to U.S. economic development and settlement.

That trail played a vital role in the expansion of the U.S. into the lands it had acquired.

Travelers faced many hardships along the Santa Fe Trail.

Today, the trail to new highs for the S&P 500 and NASDAQ 100 was crossed.

However, that is far from the case for the Russell 2000 and his mode of transport Transportation IYT.

IWM and IYT seem to be on the trail that’s smacked with dangers.

Perhaps it’s a lack of food or water.

Perhaps it’s the weather, or the rattlesnakes.

Or maybe they face strong enemies.

Regardless, although both have made significant progress in a week’s time, both still have quite the journey ahead to new highs.

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In Transportation IYT on September 13th, 2018 the high was 209.43.

Then, the week of December 07th 2018, IYT had a high of 199.09.

From there, the sector crashed down to 155.24.

Since then, IYT rallied back to 200.42 the week of April 26th2019. But that was not a new all-time high.

Today, with new highs in SPY and QQQ’s, IYT’s intraday high was 196.79.

For this rally to continue, we must first see the high of the week of April 26th (200.42) taken out.

Now, comparing IYT to SPY, while SPY peaked in 2018 around the same time IYT did, it made a new all-time high the first week in May 2019.

IYT did not.

Then, SPY did it again in July and now once again today at 303.85.

IYT has not.

Should bulls be concerned?

Yes.

Unless IYT blasts off from here while SPY consolidates, this rally in tech and Fortune 500 companies remains artificial.

In other words, SPY, QQQ and SMH do not reflect what IYT suggests-the demand side of the economy is not that happy.

Sure, the Santa Fe Trail opened trade and the westward expansion.

However, horse travel was replaced by the much more efficient freight travel.

With inferior U.S. transportation infrastructure coupled with the inferior demand of goods and services, at what point does our transportation underperformance cause all-time high bull travelers’ hardships?


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S&P 500 (SPY) 300 support. 303.85 ATH to take out.

Russell 2000 (IWM) 156 support to hold 158 resistance

Dow (DIA) 270 pivotal support. 265.50 support

Nasdaq (QQQ) New all-time highs at 197.83. 195.55 support

KRE (Regional Banks) 53.00 support 55.00 pivotal

SMH (Semiconductors) 127 support and new ATHs at 129.12

IYT (Transportation) 195 pivotal

IBB (Biotechnology) 105 pivotal 108 resistance

XRT (Retail) 44 must hold

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