The Positives From A Positive Reversal in the Transports

• Posted by Greg Harmon
• on January 9th, 2015

My wife took off today. Well not forever, just for the weekend. But to San Diego. Now San Diego is a magical place. Where narwhals bob in the Pacific Ocean so the natives can play ring toss and the big event of the year is the one day it is cloudy. So we will miss her here.

But if you are from the mid West then you know it is an especially magical place this time of year. You see the weather at my house just outside of Cleveland is forecast to be 10 degrees or less, everyday, with wind chills of minus 20 to minus 10. Oh and did I mention the snow? During all this I will be carting around two kids to their activities all weekend. Basketball, speedskating, birthday parties, 4th grade retreat (seriously?) and who knows what else.

For a guy who works out of the home this is traumatic. But it got me thinking about transportation. And then looking at the Transportation Index. And wow, if that is not exciting!

The chart of the Dow Jones Transportation Average above has a very interesting phenomenon going on. You can see many positives. The second bounce off of the 100 day SMA with a higher low (remember that thought). The confirmation higher of the Harami candlestick from Wednesday. The RSI and MACD turning up. But one you might not recognize is the Positive RSI Reversal.

This occurs when the RSI falls back and makes a lower low, while the price or index, does not make a lower low, and then both reverse higher. This technical pattern looks for a retracement in the index higher equal to the last leg higher or more. For the chart above a move from 8580.81 to 9257.44 or 676.63 points, added to 8659.40 or to 9336.03.

This is significant as it would make a new all-time high in the Transportation Index. That could mean a new Dow Theory Confirmation if the Industrials come along as well. And a renewed commitment to the uptrending market.

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