TRAN Transportation Index Weekly and Daily Charts Negative Divergence Cup and Handle (C&H) Pattern

Trannies dump -1.1% yesterday and interestingly, this occurs as oil price is dropping, not rising. The charts clearly show the negative divergence spank downs on the daily from the May and July tops as well as the weekly chart that topped two weeks ago.  The daily chart, like all of the indexes and many other charts, show an ongoing 5-month sideways range. For the Trannies it is through 5900-6600.  The daily chart indicators are weak and bleak wanting to see lower lows after any bounce would occur. Watch the 50% levels for all the indicators on both charts. If the 50% levels fail, price is clearly taking a walk on the bear side moving forward.

The weekly chart shows the C&H pattern playing out in textbook fashion.  The base of the cup is 4200, the breakout line is 5400, so the 6600 level is the target, now achieved satisfying the C&H. Note how price is extended above the 20-week MA above the 50 MA above the 200 so this begs for some reversion to the mean.  The 20-week MA failure typically indicates market trouble like the top in summer 2011 which led to the August 2011 waterfall crash. Equities also sold off in Fall 2011, then May 2012, then the September-October 2012 market top and more recently, price fell under the 20-week MA. This was saved by the Fed when the members paraded in front of the television camera's each day shouting "QE Infinity!" which created the bottom. On Independence Day, 7/4/13, the BOE and ECB central bankers pumped the markets and then the Fed followed up with more happy QE talk during the Congressional Testimony two weeks ago. Obviously, the Fed, and central bankers, are the market.

From a Dow Theory perspective, all was fine with new highs in Trannies and new high in the Dow, however, TRAN is now drifting lower for a couple weeks but the Dow keeps playing around at the highs. The bulls need to see Trannies recover quickly and run above 6600 to keep the upside market party going.  Projection is lower prices moving forward for the weeks ahead. Watch the 50% levels on the indicators for clues. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.