INDU Dow Jones Industrials and TRAN Dow Jones Transports Daily Charts; Dow Theory; H&S

From a Dow Theory perspective, the trannies are printing lower lows and lower highs (red dots). If the Dow Industrials confirm this negative trend, it forecasts troubled times for the stock market ahead. If the Dow continues sideways and sideways higher and TRAN moves above 9300 the upside bull market party will continue.

If the Dow Industrials drop under 20404, that would be a lower low (red dots) and confirm the downtrend in the trannies as per Dow Theory. At that point, the stock market would be expected to roll over to the downside. TRAN exhibits a H&S pattern with head at 9600-ish, and neckline at 8875, so the downside target is 8150 if 8875 fails. The upper sideways channel behavior started later with INDU after February so its downside target is 19638 if 20404 fails. 

Note how INDU was making lower lows in 2016 going into the presidential election. The trannies were trending higher but in an ominous rising wedge pattern. Since the Dow was not confirming the strength in TRAN, the expectation would be for both the industrials and transports to drop like a stone, but alas, President Trump wins the election and everyone touts easier banking regulations, lower taxes and huge infrastructure spending ahead so it was immediate party time.

Stocks leap higher from November forward both indexes printing higher highs confirming more stock market upside (green dots), until the trannies collapse in March. Watch the 20404 level on the Dow very closely. Ditto the 8875 level on TRAN. These are bearish levels where bad things will happen to markets if they fail. 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.