Transports are Revving Their Engines

• Posted by Greg Harmon
• on September 8th, 2016

The participants have all been through pit row and are getting a feel for the track with new tires and a full tank of fuel. The pacer car is about to leave the track and you can see the starter picking up the green flag to re-start the race. No, I am not talking about Nascar, but the move in the Dow Transportation Index. The Transports started the race in late 2012. They ran higher for 2 years before the yellow flag came out in late 2014. And it took over a year to clear the track of debris.

From the chart below you can see the Index pulled back to a low to start 2016 at 5403. This retraced 87% of the 2 year run higher. But then it moved sharply higher. By March it had gained 50%. A great move, but still short of the 2014 high. It has been consolidating from there. It had a pullback to a higher low and is now approaching the consolidation high at about 8150. This is a big level from a technical perspective.

First a push over 8150 would trigger a short term break out and a target of over 10,000. But lets not get ahead of ourselves. Most importantly this would make for a higher high off of the bottom in January. A higher high after a higher low is the beginning of an established uptrend. But that does not get the Transports towards the checkered flag. The next key price level is the 2014 high.

A move over that does two things. It finally gives Dow Theorists a strong reason to buy the market, no more excuses. And it would confirm an AB=CD pattern, giving a target to 9875. A second target near 10,000. Watch for the pace car to be off the track as the Transports hit 8150 to signal a new leg higher.

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