Transports clarifies the bigger picture

Perhaps the most important aspect of today's bearish price action was seen in the Transportation index. The 'old leader' has broken the rather critical rising channel support, on the weekly cycle. It is now highly probable that a mid-term top has been put in.


Trans'weekly

Trans'weekly2, rainbow

Summary

Today's close for the Tranny was about as bearish as any bear out there could have hoped for. Not only do we get a close decisively below the key 6200s, but it breaks the rising channel. On the weekly rainbow (Elder Impulse) chart, we even have our first red candle. Of course, the week is not over yet, and we could flip back to blue, but the point is...lower highs...lower lows.

Transports is HIGHLY suggestive that a mid-term top is in. In terms of sp', it looks more likely than not that sp'1687 will now also mark a key high. Bears should merely look for a lower high in the next 5-10 day rally.


Staying with the transports, the monthly chart is also starting to rollover.

For those doomer bears out there seeking much lower levels in the weeks..and months ahead, the above chart is probably the most bearish out there right now. We now have our first blue candle..the first non-bullish candle since Sept'2012. 

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**Bonus chart

The following is just something I think might help clarify what is now my 'best bear case' outlook for the next month or two.

sp'weekly'7

The key point to note is that in any multi-week down cycle, primary target should be the lower bollinger band (weekly cycle). That seems to be a very valid target, and has been a good floor in the last 3 or 4 down cycles. 

If we get down to the sp'1550s or so, what will then be interesting to see is what level of bounce do we get in the subsequent 4-6 weeks. Naturally, some will be looking for a July/August'2011 scenario, and certainly, the monthly index charts are looking over-stretched.


Looking ahead

The only econ-data of note tomorrow is the weekly jobs data, market is seeking 345k. As noted earlier, hourly index charts are suggestive of some degree of bounce, but it might not be much.

A hit of the sp'1600/1597 zone seems very viable tomorrow/early Friday, before the next 1-2 week up cycle - which itself might put in the first key lower high.

*as for yours truly, I will merely seek to exit (existing 'underwater' long positions) in the upper sp'1630s, if I have to wait until next week...I can just about live with that.

Goodnight from London