Thursday, September 6, 2018

TRAN Dow Jones Transports Monthly Chart; Overbot; Rising Wedge; Negative Divergence; Price Extended; Upper Band Violation; Trannies Printing Long-Term Top; Dow Theory Non-Confirmation

Now that August is in the rearview mirror and September has begun, the monthly charts can be assessed. The SPX (S&P 500), the major stock index most-closely followed by professional traders and considered synonymous with "the stock market" indicates that a long-term stock market top is in place a la October 2007. The SOX (Semiconductors Index) has also placed a significant long-term top. Ditto the trannies (TRAN; Dow Jones Transports).

INDU, or DJI (Dow Jones Industrials), is set up similarly as the SPX and SOX but the Dow has not overtaken the price high from late January. Ditto the NYA (NYSE Composite).

The COMPQ, NDX and RUT indexes are nearing their long-term tops but are not yet fully negatively-diverged due to the long and strong MACD lines. With the Labor Day holiday behind us and the last four months of the year ahead, it is a good time to review these charts and surmise how the long-term top in the stock market may play out.

The TRAN, or DJT, monthly chart above displays the higher high in price as compared to the January record highs. The all-time high is 11475.74 on 8/28/18 and all-time closing high 11436.36 on 8/21/18. Note that all the chart indicators (RSI, MACD, histogram, stochastics and money flow) are negatively diverged verifying that the fuel tank that drives prices higher is empty. The Dow Transports are now moving higher on fumes. The stochastics and MACD line are trying to eek out more bull juice but that will likely be short-lived. The red rising wedge and overbot RSI and stochastics are also bearish indications. Price is also extended above its moving average ribbon requiring a mean reversion lower.

The trannies have violated the upper standard deviation band since the beginning of the year, and actually since late 2016, so the middle band, also the 20-month MA, is on the table, at a  minimum, at 10122 and rising. This level is 1245 points under the current price; about -11% below.

The chart signals that the long-term top (months and years) is in place for the trannies. The transports rolled over before the broad stock market topped in May 2015, a significant top, but the global central bankers colluded to stop the slide in early 2016 that created the Tweezer Bottom on the chart. Of course the central bankers will always implement policies that protect the wealthy privileged class that own large stock portfolios. The central bankers perform the wealthy's bidding since they are rewarded by the investment banks for their loyalty with lucrative speaking engagements once they leave public office. Wall Street is a corrupt cesspool of filth.

The negative divergence shown by the red lines for the chart indicators signal that THE long-term top for the Dow Transports is in.

From a Dow Theory perspective, the new record highs in the Dow Industrials should be confirmed by new record highs in the Dow Transports, and visa versa, to prove that more record highs are ahead. The trannies print new record highs as indicated above in late August but the Dow Jones Industrials (INDU, DJI) have not yet overtaken their record highs from January. This needs to occur to prove that the bulls can take the stock market higher. If the Dow Industrials fail to print new record highs, it is a Dow Theory non-confirmation and stocks would be expected to roll over to the downside and perhaps begin confirming in a bear pattern moving lower.

The ADX shows that the trend higher in 2014 was a very strong trend (pink box) but this petered out after the broad stock market topped out in May 2015 and everything rolled over to the downside. Interestingly, the trannies continue rallying higher this year to new all-time highs but the ADX is down at 22 indicating that the upside rally since 2016 is NOT a strong trend higher.

Also watch the Aroon since the green line will fall to verify that THE top is in for the trannies. These prices reflective of trucks, planes, trains and shippers may not be seen again for many months even many years. If you are a young person contemplating placing money in the stock market; don't. Let that money sit on the sidelines, do not worry that it will not receive much of a return, if any. In a year or two, you will look back and realize it was a smart decision and at that time, depending on how things play out, you may have an excellent chance to enter the stock market at far lower prices. That red rising wedge is very ominous. 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.

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