The Problem with the Transports
- Posted by Greg Harmon
- on August 30th, 2012
On and off through out the last year railroad and trucking stocks have looked like tradeable stocks only to fizzle and never break out or reverse. There have been some moves but not the extent expected. Right now, the railroads are looking better than the truckers. But combine them and add a few airlines and you get most of the Dow Jones Transportation Index ($DJT, $IYT). For Dow Theorists this index is important in confirming a move in Dow Jones Industrials Average ($DJIA, $DIA). Without it, no new trend. The problem has been that the Transports have been moving sideways. A look at the weekly chart below shows a symmetrical triangle going back to at least
December 2011 if not June 2011. A symmetrical triangle can generate a powerful move but the longer it goes on the power begins to dissipate. This one is now heading into the apex where all of its potential is soon t be lost. That does not mean that the Transports will not move, but history has shown that this late into a triangle the move is muted. For the Dow Theorists looking for the Transports to confirm a new high in the Industrials this is a problem. Without confirmation this group will not be plowing money into the market. Yes, old school technical analysis. Does it still matter? Its your money. You decide.
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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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