The ADX (14) on the S&P500 indicates that we are in non-trend territory at the moment. I'm reading a book on technical analysis where one tool was to compare the DOW jones and the Dow transportation indexes to look for divergence. For example, when the transportation index fails to confirm a high on the Dow, it could indicate a change in trend. So, I don't know if its significant, or if I've done this properly, but I thought I'd take a crack at it. If I'm "fishing for trout in a sea of rocks", let me know ... haha
At the beginning of the year, the Transportation index failed to confirm the continued up-tick in the Dow Jones, signalling a potential end to that intermediate trend. Soon after, there was a sell-off bringing both to yearly lows. The next move was up, and the first yearly high on the dow was confirmed by the transportation index. However, the transportation index failed to confirm the second yearly high in July along with the Dow, signalling a move down,which is exactly what happened.
Over the long term, though (i.e. the past three years) I can't find any large-scale indications using these comparisons of a major trend shift in the making. Both indexes look to be following the same basic path - so the major trend would still be upwards. We are also, incidentally, still in a techical three-year bear market as we have not recovered losses from the housing bubble. The recent action in the markets (since about July) is not a major trend, but rather an intermediate trend.
So, the question burning on my mind right now is what bubble will move the markets further upward. EU bailout confirmation next week? It looks to me as if the market are already pricing that in right now. Another big question for me is what black swan could reverse the current long term trend?
Well, that's my story -
