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iShares Transportation Average Message Board

  • keybotthequant keybotthequant Jan 19, 2013 10:00 AM Flag

    $TRAN Transportation Index Chart Shows New All-Time Highs also Dow Theory

    The TRAN, Transportation Index, Trannies, print an all-time high this week as shown by the blue line. Strong Trannies is key to a robust and long-term recovery. The TRAN has been stumbling sideways for a couple years thru 4800-5400 and has now broken out to the upside. Keystone's 80/20 rule says 8's lead to 2's so the closes above 5680 now open the door to the 5720's. The red and green lines show the positive and negative divergences that create the bottoms and tops, respectively. The stochastics are overbot, and RSI is near-overbot, and the red lines show firm negative divergence in play with the new price high. The green lines, especially over the last few weeks, shows a long and strong profile with momo, that is part of this wild upside orgy move. Thus, it is reasonable to expect sideways choppiness to burn the positive energy off. The 5400 level is the key breakout level from the channel, thus, considering its long-term multi-year importance, a back kiss of the 5400 level would be expected moving forward. Price may want to enjoy the view up here for a while, however, perhaps a few weeks churn thru 5600-5750 due to the overwhelming thrust and momo to start the year.

    The Trannies are important from a Dow Theory perspective as well. Dow Theory is one of the first indicators used in the markets decades ago. When the railroads were humming that signaled bullish times ahead and adapted to the modern day, when the ships, airlines, trucks, UPS, FDX, are humming, bullish times are ahead. A breakout in the Trannies must be followed by a breakout in the Dow Jones Industrials, and visa versa, to keep the upside party going. Conversely, Dow Theory confirms the downside when the Trannies and Industrials continue to confirm each other, making lower lows. Now that the Trannies made a new all-time high, eyes will be watching for the Industrials to confirm.

    TRAN has broken out to the upside, however, it is hard for price to make a lot of headway higher when the indicators are already overbot and not enthusiastic due to the negative divergence. The short term momo should keep the Trannies elevated for perhaps a few weeks to burn off the positive energy, say 5600-5750, but a back test of 5400 would be anticipated in the weeks ahead.

    For TRAN chart, a Dow Industrials chart, and other technical analysis explaining Dow Theory, use the search box above for Keystone Speculator

144.27-0.14(-0.10%)Oct 21 8:00 PMEDT