The 1934 film “Death Takes a Holiday,” explores why people fear it so much.
While “Death” takes on a human form so he can unidentifiably comingle, he falls in love with a human.
In the end, he must either sate his love and let her die or sacrifice his happiness and let her live.
Last week, a similar drama played out in the Transportation Sector.
After struggling since March to get over the resistance at 170, last week, on a quiet ½ day ahead of the July 4th holiday, IYT gapped higher.
That gap caught my attention since the sector looked like death back in May. The resurrection above key resistance on the monthly chart, made me well, fall in love.
Last Thursday night I wrote, “That makes Monday’s low price 172.85 important, especially on a closing basis for this week.”
IYT did better than that. It squashed the fears of investors and closed on new all-time highs.
If the death of transportation took a holiday, does that mean it will sate or sacrifice its love for the rest of the market?
The Russell 2000, after a rough week, about to confirm a Warning Phase, turned around on Friday. IWM’s respect for IYT drove it back above 140 and back into an unconfirmed Bullish Phase.
Since I defer to the Modern Family, I found the action in Regional Banks (KRE) and Biotechnology (IBB) holding onto their bullish phases, constructive.
Even though Retail (XRT) got crushed this year, the market has clearly divorced itself from brick and mortar weakness.
At least for now. With unemployment at 4.4%, huge layoffs in retail have yet to impact the overall economic picture.
So why do I hold Transportation in such high regard?
Way way back in the beginning of 2016, when Brexit dominated the headlines, IYT fell to 115 on January 20th.
Although IYT consolidated and began to run up from there, the Russell 2000 continued to fall. It made new lows and finally reversed on February 11th.
After I saw IYT bottom, I tweeted to folks that it was time to look for a buy opportunity on the basis of IYT’s relative strength.