Life with Trannies is Always Exciting
- Posted by Greg Harmon
- on February 29th, 2012
Many people in my circles could not imagine life without Trannies. It is part of their upbringing and just normal. But I understand that Trannies can be an after thought in today’s world. What with the large number of other Indexes around now, the S&P 500, NASDAQ, Russell 2000, the Transportation Index can get lost in the mix. You are still with me right? You knew I meant the Dow Jones Transportation Average ($DJT, $IYT) of course. This Index has been a cornerstone of Technical Analysis in the US Markets forever. As part of Dow Theory, the Transports need to confirm a new high in the Industrials ($DJIA, $DIA) for a new trend to be bought. This has been a sticking point keeping many Technical Analysts out of the market as the $DJIA has been making new highs, without confirmation. But the monthly chart for the Transports below does not show any sign that you should be panicked. It is moving higher along the Median Line of the Andrews Pitchfork and consolidating some gains at a previous high. If it were to drop back below 5000
then some alarms should trigger but no one ever said that the confirmation from the Transports had to happen the day the Industrials made a new high. In fact the Dow Theory as practiced by Charles Dow and codified by Robert Rhea missed the first 10-20 % of the move ON PURPOSE in order to be certain that the trend had changed. In an era when you got one price per day and your news from a newspaper that was a good plan. If Iran was going to block the Strait of Hormuz, for example, you did not know it for a week. This is not to say that the confirmation is no longer important. A totally separate debate, but just because the Trannies have not confirmed the Industrials new highs, does not mean the uptrend is not happening. Look at the price action. Trade that, and if you want, save some powder for the the rise of the Trannies.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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