Tue, November 2, 2021 | 7:11PM ET

Technology, Transport, Small-cap Breakout all encouraging near-term

Name: FS Insight
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FS Insight Team

Technical Strategy Video (Recorded Tuesday, November 2nd):

Technology, Transport, Small-cap Breakout all encouraging near-term

Key Takeaways

Further signs of broad-based recovery happening with NYSE Advance/Decline moving back to new all-time highs
Two formerly underperforming groups, the Dow Jones Transportation Average and Russell 2000, both have moved back to new all-time highs
Technology just broke out again on an Equal-weighted basis on Tuesday
Ethereum push back to new all-time highs should allow this to lead Bitcoin in relative strength in the short run

Small-caps set to outperform given Russell 2000’s move back to new all-time highs

Transports finally joining SPX, DJIA and NASDAQ back at new all-time highs

The DJ Transportation Average has finally eliminated the Dow Theory negative divergence by following the Dow Jones Industrial Average back to new all-time highs. It’s always an important technical indication when divergences between Industrials and Transportation are eliminated. In this case, it gives more near-term ammunition to the Bulls for a further advance into December

Given the “leading sector” qualities in Transportation, the act of this joining other indices back at new all-time highs is seen as quite positive after having slumped by moving sideways in consolidation since peaking in mid-May.

Sub-groups like Trucking, Shipping, and Logistics kickstarted the advance, but now groups like the Rails are following suit and have pushed back to new highs. Unfortunately, the Airlines remain laggards and have not really shown much technical strength to think a large mean reversion bounce has to happen.

Technology has just pushed back to new all-time highs- XLK achieved this last week on the NASDAQ pushing back to new highs. However, now RYT, the Invesco Equal-weighted Technology ETF led the rally Tuesday and proved to be the strongest major sector by performance when looking solely at Equal-weighting. FFIV, IT, JNPR, CSCO, MSI, MCHP, KLAC, NVDA, ANET, IPGP, ZBRA all advanced more than 2% in trading Tuesday 11/2.

Crypto breakout likely to lead to a very good November- Ethereum’s push back to new all-time highs after just three days of consolidation is a very good sign technically. This should fuel some short-term outperformance by ETHUSD over BTCUSD, (the latter which made its own push to all-time highs back in October) Ethereum has already made minor breakouts of its Dominance index and ETHBTC structural improvement. Further rallies likely and ETHUSD ST target is 4951.

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