Group Outlook:
The industrial group is large and diverse, and the subsectors within carry a wide swath on names that shed light on a full range of the economy. The XLI is near correction mode down 9% from most recent 52 week highs and it had issues with the round 80 number not just recently, but dating back to January of this year. In fact it registered just 3 CLOSES above the figure on 1/12, 1/26 and 1/29. The ETF was approaching an 81.06 cup base pivot in a formation that dated back to the beginning of the year, but it was never taken out. Below is the present look at the chart for the XLI. Like we mentioned earlier, stocks included in the industrials are manifold, and one can look at worst of breed names like a FRTA. It probably never should have come public, but did so at a time when an infrastructure bill was talked about incessantly. It now trades 59% off most recent 52 week highs. Former leader CTAS which services over one MILLION businesses in the USA and can give a lot of light on how they are doing is down 17% from recent highs and is looking at a potential 6 week losing streak. To give some perspective prior to this streak it had not recorded more than a 3 week losing streak in the last 2 years.
Transport Look:
It was not long ago that everyone was excited about the transport breakout. And quite frankly they should have been. But one must trade the market they have an not the one they want. It is a very important group and has a genuine feel for the true health of the overall economy. Below is the chart of the IYT and shows a good looking WEEKLY cup base breakout above a 206.83 trigger in a pattern that was 8 months long. It was even better than it seemed as it thrust above a 3 week tight pattern as the 3 weeks ending between 8/24-9/17 all CLOSED within just of 1.12 each other. The ETF is now looking at a potential 5 week losing streak as this week is lower by almost 1% heading into Friday, unable to recapture any of the prior weeks big loss of 6.4%. It is a good example to be wary of any breakouts that fall apart so rapidly, as we know the best one tend to work out right away.
Examples:
The building materials and fixtures space of the industrial group has been under assault for some time. Many former best of breed names including OC, VMC, EXP and AOS are all lower by between 30-50% off their own most recent 52 week highs. Below is the chart of SUM and how it was presented in our Industrial Report from 9/24. The last 3 weeks for the stock has cratered nearly 20%, and this week headed into Friday has declined 11%. It nows sits 59% off most recent 52 week highs and since the beginning of September it has gained ground just 11 times, and 9 of those gainers have risen less than 1%. There is nothing to do here as the measured move has been achieved and then some, but shows the power of momentum in an up or downtrend.