Wednesday, 2 August 2017

Transport Index IYT Finding Support Soon?

Dow theory occupies an important place for many investor. I don't believe it (well, not worshiping it), and i've seen evidence to the contrary (that's for another article). This is for those who believe in Dow Theory. Who wants to argue with the market? I don't.

After a quick run-up in May 2017, it deteriorates rapidly since July 2017. We're now testing the 200 DMA.

IYT etf showing price around 200 DMA
IYT etf showing price around 200 DMA

But if we fail this we have an even more critical and longer term IYT/SPY ratio support coming up. This ratio is on a steady up trend since IYT comes to existence.

IYT/SPY ratio from 2004 to 2017
IYT/SPY ratio from 2004 to 2017
(click to enlarge)

So IYT may still have a bit more downside (based on the ratio chart), which has ridden both bull and bear cycle, and remains uptrend for more than a decade. If the support of the ratio chart fails, i would be worry.  Believer or not.

UPDATE (3 Aug): IYT tested, held and bounces off 200DMA nicely today. Bought some good corrected airlines and other transport stocks for quick swing trades.

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