The Situation

​​We just start to realize how deep and quick the correction at the end of June
​was ​on Brexit fears on the ​​​​US equity market: ​From the pre-Brexit close made
​on June 23 2016 on the Dow Jones ​Transportation Average ETF IYT 
(iShares Transportation Average ETF) at 137.65, to post-Brexit close 2 trading
​sessions after on June 27 at 125.94, ​a drop of 8.5%, a level reached back in
​mid-February 2016.

Rebounding from those technical levels was quite a statement ​from Mr Market
​but few of us realize that the the post-Brexit panic was in fact an opportunity
for portfolio managers to rebalance at the end of month/quarter from cash
​and bonds to stocks. Also, the relative flight to quality and liquidity was in
​strong favor of US Equities​​.

​​But the Mighty Dow Jones Transportation Average Index ETF (IYT) is finally changing his message as it is now outperforming other Major Indices: it becomes a Market Major Milestone...

Here is some Technical Observations:​​​
​​1) From the bottom price reached on June 27 for SPY ETF to the peak reached on August 7, it was up by +15.2%; IYT ETF  out performed with +10.5% from its previous low reached on June 27 to the previous peak 
made on August 23. (See first chart below)​
​
​​2) On September 7, IYT ETF closed +5.8% above the 200 DMA (Day Moving Average) ​(See first chart below - Green line)​  but SPY ETF still +6.4% above its 200 DMA.

3) Historical Volatility (past 10 days) on SPY ETF is at 5.88, a lot lower than the IYT ETF at​​ 1.39.
​
​​​​​​​4) SPY ETF already broke its Major Resistance Trendline from 2015 on July 8, which was THE Major Breakout; IYT ETF finally broke on September 7 its own Major Resistance Trendline that started back since November 9 2015.  ​Bulls need to keep above that Trendline from now on. (See first chart below - Top Blue Trendline - Ellipse)

5) ​​Also on September 7 2016, on a relative basis (the ratio of Dow Jones Transportation ETF IYT ​to the Mighty Dow Jones Industrials ETF DIA) we broke the Major Resistance Trendline that started back since January 14 2016 ​​(See second chart below - Blue Trendline - Ellipse)​ and closed above the 200 DMA (Day Moving Average) on that ratio, a Major Technical Move Indeed.  ​​(See second chart below - Green Line - Ellipse)​

​​6) ​Let s now compare to the Mighty SP500 Index on a relative basis. The ratio (Dow Jones Transportation ETF IYT ​to the Mighty SP500 Index ETF SPY) keep making lower highs and lower lows and broke on September 1 2016 the Minor Resistance Trendline. (See third chart below - Grey Trendline- Ellipse)​ .
 And looking at Monthly charts on those ratios gives us a better overview. (See fourth and fifth charts below)

​As the ​​​​​Mighty DIA ETF got way over the previous peak reached on April 20 2016, the Dow Jones Transportation ETF IYT ​failed to reach yet the previous peak of April 2016 at 146.07 on IYT ETF. But we finally had an higher close on September 7 than the July 14 peak then cancelling the bad technical pattern of a lower highs and lower lows pattern.​​​

​​But most importantly, the Big Divergence is starting to fade between Dow Jones Transportation, the Dow Jones Industrials (See six chart below) and the SP500 Index (SPY ETF).

The First Battle for Bulls have been won on September 7 2016 by is breaking the Major Resistance Trendline​​. The DJ Transportation Average was the only Major Stock Market Index who did not break out yet technically speaking before that.  ​(See first chart below - Blue Trendline - Ellipse)

Next​​ Bulls Challenge on IYT ETF is having a daily close above the previous peak of April 20 at 146.07.





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