Wednesday 19 December 2012

A scary index for the doomer bears

The transportation index - the 'old leader', saw a daily close +1.6%, and that now makes for a weekly gain of 2.4%. We are fast approaching the 5400 level - the March highs. A few consecutive daily closes in the 5400s would be extremely bullish for the broader market into early January.


Trans, weekly



Trans, monthly


Trans, monthly2, rainbow


Summary

Just yesterday in the early part of the afternoon, the tranny was sporting a fifth spiky candle on the daily chart, but with the closing hour ramp, the tranny closed at the high of the day, and today's follow through was strong confirmation of underlying strength.


Breaking to the upside?

The big monthly transports chart is something I have been highlighting since I started this little blog in the early spring. We've been stuck in an extraordinary tight trading range ALL year, but once again we're on the edge of an important monthly breakout.

As I have kept noting, a close >5400 is bullish, whilst the bears should be seeking <4800. Today's close is a mere 1.5% away from breaking the bullish threshold. For the doomer bears, the transports had better reverse...soon.
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A few bonus charts

USD, daily



USD, monthly2, rainbow


Ignore the count on the daily chart, regardless of how anyone might like to count the current waves, the dollar is clearly on the slide. It looks much more serious though from the monthly perspective, where we have an initial break of rising channel support.

A December close <80 would be a real warning that the slow - but gradual, up trend from April 2011 is over. Considering the US Federal Reserve will start 45bn of 'unsterilised' t-bond buying in January, you'd have to think this initial sign of dollar weakness will see follow through in early 2013.

For those seeking major equity declines, a new wave lower in the USD is going to really pose a problem. As many are increasingly noting, 2013 might be the year when 'currency wars' really start to intensify.
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One last chart to close the day.

sp'monthly3, rainbow


We now have an outright bullish green candle, and again, its notable that we've not had a monthly closing red candle since September 2011. Considering the price action of the last two days, even a blue candle to close the year would seem overly hopeful.

Goodnight from London