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DJ Transports: Break Out or Fade ?
 July 29 ( From TradingView )
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The Situation

​​The US equity market was showing some strenght since mid-October 2014.
​Transports were ​performing very strongly since then and was a sign for that;
​it did confirm the last upleg of the ​stock market. ​But the Transport are
​weakening tremendously vs the DJ Industrials since ​January 29 2015.

​​​​​On May 26, we had the 50 DMA ( Day Moving Average ) on the Dow Jones
​Transports crosses below the 200 DMA ( Death Cross ). A bad omen...
( See first chart below: 50 DMA - Red Line - 200 DMA Green Line - Ellipse )​

In fact, a lot more technical damage have been done when we broke the
​Support Trendline also on May 20...​​​ ​( See first chart below: Grey Trendline )

​​ONE chart below is worth a look where we will show the ratio of the ​​Dow Jones
​Transportation ​and the Dow Jones Industrials compare ​to the Mighty SP500.
​(  Second Chart )...


Since January 6, the 50 Day Moving Average on that ratio ( DJ Transports over DJ Industrials ) started a brand new downtrend​ ​( DJ Transport started to underperform the Industrials ), indicating ​a weaker stock market ahead as shown by ​​the charts below... It reached a level last seen in May 2014...
​( See Second Chart below: Red Line )

Lets take a look at the Dow Jones Transportation ​compare ​to the Mighty SP500: Since January 7, the 50 Day Moving Average on that ratio started a brand new downtrend​ ​( DJ Transport started to underperform the SP500 Index ), indicating ​a weaker stock market ahead as shown by ​​the charts below... It reached a level last seen in December 2013... ​( See Third Chart below: 50 DMA Red Line )

We could be near the Break Out Phase:
1) ​​DJ Transports near breaking the resistance trendline from a downward channel that started back on March 20 2015. Also near breaking the 50 DMA ( Day Moving Average ) at 8316.97 as of July 28 closing price...
​( See first chart below: 50 DMA Red Line )​
​​2) We already are above the 50 DMA on the Ratio of the DJ Transports over DJ Industrials... 
​( See Second Chart below: Red Line )
3) We are near testsing the 50 DMA on the Ratio of DJ Transport over the SP500 Index...
​( See Third Chart below: 50 DMA Red Line )

So follow those 3 factors to decide IF we have or not the Break Out or the Fade pattern...​​


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RATIO
Dow Jones Transport ​
​Dow Jones Industrials
  ( Top Panel - Blue Line )
50 DMARed Line )​

and SP500 Index​ ( Bottom Panel )
Let s start with the Dow theory :

​..."In Dow's time, the US was a growing industrial power. The US had population centers but factories were scattered throughout the country. Factories had to ship their goods to market, usually by rail. To Dow, a bull market in industrials (INDU) could not occur unless
​the railway average rallied as well (TRAN), usually first. According to this logic, if manufacturers' profits are rising, it follows that they
​are producing more. If they produce more, then they have to ship more goods to consumers. Hence, if an investor is looking for signs
​of health in manufacturers, he or she should look at the performance of the companies that ship the output of them to market, the railroads. The two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning
​that change is in the air."..
Charles Dow
DJ Transports: Break Out or Fade ?  $DJIA, $DJT, $SPY #investing #dowtheory #SP500 #dowjonestransport

Dow Jones Transport ​( Daily Candles )
​20 DMA ( Yellow Line )
​50 DMA ( Red Line )​
200 DMA ( Green Line )​

RATIO
Dow Jones Transport ​
​SP500 Index  ( Top Panel - Blue Line )
50 DMA ( Red Line )​

and SP500 Index​ ( Bottom Panel - Candles )
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