Old-Fashioned is Getting Rusty These Days

Most things old-fashioned seem to be getting rusty these days, including the typical market warning signs of an imminent correction after an established, strong uptrend. 

Case in point: It is not just the small caps which have been flashing cautionary or even bright red blinking lights to the market bull case this summer, but also the rusty transportation stocks.

On the IYT daily chart, below, which is the ETF for the transportation sector at-large, we can see in a similar vein to to the Russell that the transports are operating below their 200-day simple moving average (yellow line). Clearly, this technical predicament stands in stark contrast to the senior indices which have not suffered nearly as much of a typical pullback or even correction as the small caps and transports have, thus far.

This, in turn, begs the question again of whether the standard, old-fashioned warning signs from the transports (see: Dow Theory), beyond the small caps, will prove true as a warning sign of what is to come for the "industrials" in the Dow, the S&P, and the Nasdaq in the coming weeks. 

Given the bounce we are seeing this morning, with QQQ leading the way for tech, you can be sure that the old-fashioned warning signs will be put to the test again for bears. Bringing the senior indices down to their respective 200-day moving averages would not be evidence of a new bear market, and is historically seen as part and parcel of even the strongest bull run corrections. But it sure has been a rare sight to see. 

Should this bounce gather steam, we have been noting for Members a few growth stocks which held up remarkably well of late. Still, it is early and I suspect bulls will need to hold this bounce well into the afternoon before we see some shorts begin to start throwing in the towel.