Revisiting the IYT

A few days ago I expressed my concern about some trading in the IShares Dow Jones Transportation Avg (NYSE: IYT). This index, which tracks the Dow Transport Index bounced off of its recent high and retreated, along with the overall market, which was a bearish sign. I noted that the volume was not there to support a full bearish thesis, but that the relationship was worth watching. Well, I am happy to say that that pattern is completely void after the IYT has pushed to new highs the past two days. The IYT is currently trading $78.35, up 1.45% on the session and nearly $2.00 from the recent high. The index is clearly breaking out.

In fact, the IShares Dow Jones Transportation Avg is not the only index breaking out. The XRT, which tracks retail, has significantly broken out of its range, as well as the KBW Bank Index, which just broke out today. There is also a good chance that the XLF, which tracks the SPDR Financials, is set up for a break up and out.

This is all very good news for the overall market, but let’s not get too complacent here. With the CBOE Volatility Index sinking to lows not seen in some time, protection has become “cheap” on a relative basis; so, you have no excuse for not hedging your long positions in the market. You never know when another Grecian Debt crisis or Dubai is coming and what it will do to the market when it does.