TRAN Dow Jones Transportation Index Weekly Chart New All-Time Record High Rising Wedge Overbot Negative Divergence

The trannies print another all-time high today with TRAN at 8590.33. Interestingly, the Dow Jones Industrials, INDU, remains unable to take out the all-time closing high at 17138 which the Dow Theorists want to see to signal more market upside ahead. The TRAN chart is ominous considering the long-term blue rising wedge. The failures from rising wedges can be quite dramatic. The lower oil prices have been sending the transportation stocks higher since lower fuel costs mean higher profits.

The chart is firmly negatively diverged across all indicators. The red rising wedge and overbot stochastics are also negatives. The monthly chart wants to squeeze out these price levels one more time after a pull back occurs so TRAN will likely take from one to three months to roll over to the downside but the high print today at 8590, call it the 8590-8630 zone, should hold as price tops out now through December. In the near term, price should drop similar to the July sell off then come back up again as the near term juice dictates (short green lines). The longer term neggie d should remain in place so the expectation is a roll over during the coming weeks and for TRAN to head lower for weeks and months ahead (into and through early 2015).

Price is near the upper band boundary at 8656 which is in play. The small circles show distribution taking place as price moves higher over the last few months. After a strong up week, the smart money comes in and sells off stock the following week to Aunt Jane and Uncle Billy that are rushing into trannies due to all the media hype. Every top needs a bag holder. There is no particularly attractive play here. Going long is like picking up nickels in front of a bulldozer, and price may stretch sideways for a few weeks before firmly dropping making a short unattractive.

If you enjoyed nice gains in any transportation stock, take a good look at it since it is likely prudent that you trim and start scaling out; perhaps one-third now, one-third a month from now and one-third in November. Study the chart to see if similar neggie d is forming, or not. Of course the chart above will be updated as time moves along to see how things progress. In the near term, the Dow Industrials need that 17138 closing print, perhaps tomorrow?, to keep the upside party going form a Dow Theory perspective. 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.