We keep coming back to the transports and looking for Dow Theory to confirm another leg higher in the market. The daily chart of the IYT is posted below–note how recently the transports made a new high up near 117.50. The negative takeaway from this new high was that it did not hold for very long. It should come as no surprise that we’re seeing this similar weakness across some of the major transportation names.
The top 10 holdings for this ETF are featured below. Following this list I have some daily charts that give you an idea of how price has behaved lately. UNP recently made a new high, but quickly gave it back. Companies like FedEx (FDX) made a strong post-earnings move, but have still failed to hold a sustained breakout higher. This is not the type of price action that you want to see.
Moving on over to the technology sector, we can see specific sector weakness in the semiconductors. The SMH ETF (featured below) has really struggled to take out the ~$39-$40 area on the chart. We’ve seen some major signs of weakness (especially post earnings) in the mega cap technology stocks. Google (GOOG), Microsoft (MSFT), Broadcom (BRCM), and Intel (INTC) all had worse-than-expected earnings reports that were followed by lower price action.
Going forward, I think there are two obvious, yet key levels that need to be observed on both of these charts. The ~$117 area on the transports and the ~$39-$40 level on the large cap semiconductors. Perhaps a lot of investors are waiting on these two sectors to show further strength before diving in. As we are awaiting on these two sectors to make their next major moves, don’t let them fall off of your radar.