Sunday, January 24, 2016

TRAN Dow Jones Transportation Average Daily Chart Cyclical Bear Market

There is lots of talk about bear markets in the media this year as stocks tumble lower. From a peak in an index or stock, the media refers to a -10% move lower as a "correction" and a -20% move lower is dubbed a "bear market." There is nothing official about these designations in fact you will be hard-pressed to find the guidelines called out anywhere in economics or trading literature. The percentage designations are not a good gauge of whether an index, sector or stock is in a cyclical bull or cyclical bear market; take those price levels with a grain of salt. Keystone highlights these -10% and -20% levels as they occur since the main stream business media makes a big deal of the levels.

far more useful tool in distinguishing an ongoing cyclical (days, weeks, months) bull market versus a cyclical bear market is the 150-day MA slope. If the 150-day moving average is sloping higher than the stock is in a cyclical bull market uptrend. If the 150-day MA is sloping downward, negatively, the stock is in a cyclical bear market pattern. The beauty of moving averages is that they smooth out the erratic price action especially in times of market inflection points and maximum chaos.

Thus, the Dow Jones Transportation Index is in a cyclical bear market since June 2015. The Dow Transports peaked at 9413 on 11/28/14 over 14 months ago and a -10% correction is 8472 and a -20% bear market (by the media's metrics) is 7530. These levels are toast. From a  Dow Theory perspective, the Dow Transports keep printing lower lows and lower highs and ditto the Dow Industrials. Using the more important 150-day MA guideline, the key TRAN index, the Dow Transports, the trannies, the important bellwether for the global economy, remains in a bear market (for days, weeks perhaps months ahead) until the 150-day MA slopes upwards again. The IYT tracks the Dow Transports and is used as a trading vehicle for those playing this sector. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.