Thursday, December 8, 2016
INDU Dow Industrials and TRAN Dow Transports Weekly Charts; New All-Time Highs; Dow Theory Confirmation
The trannies were the big story yesterday. When TRAN broke out higher and printed new all-time highs right before lunchtime yesterday (blue line), the computer algorithms kicked in and sent stocks to the moon. The green dots show the confirmations in 2014 where the industrials and trannies keep printing higher highs and higher lows and confirm each other which verifies the stock market rally.
Trouble begins in early 2015 when the transports roll over to the downside but the industrials keep inching higher. The Dow Theory confirmation is lost. Stocks topped in May 2015 and rolled over. The trannies would not confirm the upside so stocks rolled over and a cyclical bear market started. The trannies and industrials then confirmed on the downside (red dots).
The Dow Industrials print a new higher high early this year but the transports do not. The Dow Industrials and broad stock indexes continued higher without the transports this year. After two years, TRAN finally breaks out and prints a new all-time high. Those highs today are new all-time highs for both indexes. Dow Theorists are happy that the record highs in the industrials are now confirmed by the transports so this gives the stock market rally gravitas; a Dow Theory confirmation.
On the industrials, note the W pattern bottom, base at 16K, breakout line at 18K so target 20K. The RSI and MACD line have a bit more juice so it may take 1 to 4 more weeks to top out and roll over.
On the trannies, the inverse head and shoulder (H&S) pattern is in play. There are two necklines you can look at one at 8100 and the other 8300. Two heads can be factored in; say, 6400 and 6700. Thus, these parameters yield upside targets at 10.2K, 9.9K, 9.6K and 9.5K. Price is at 9.4K. The purple ascending triangle played out. The vertical side is 800 points so adding that to the breakout level at 8100 yields an 8900 target that was easily achieved. The RSI and MACD line have some long and strong juice so trannies may need 1 to 4 weeks to top out with neggie d on the RSI and MACD and roll over to the downside. The move in the trannies is parabolic. 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.