I'm watching for one of two of the following scenarios.
1) The Dow transportation average breaks it's old high of 5548, and the Dow doesn't breaks through 12810, thus signally a potential downtrend.
If the divergence continues in this scenario, it would confirm a down-trend.
2) The Dow breaks its old highs of 12810, and the transportation average fails to do the same. That could indicate the start of a sincere rebound in manufacturing, and thus eventually the economy. If the divergence continues in this scenario, it would re-confirm that a trend upward (perhaps a significant one) is mounting.
All that is to say that if other analysis indicating bearish or bullish sentiment in the markets seems like it is taking clear shape, then the corresponding of these scenarios should follow (that is, if I've done my homework properly). So far, it actually looks like scenario 2 has a higher chance of playing out soon, since the Dow is much closer to breaking old 2011 highs. If the Dow does break those highs, combined with other corresponding analysis, then this definitely would be an early bullish signal.
Perhaps we might know by the end of the week?
BUT ... we are still a far ways off from the all-time highs of >14000 on the Dow ... and thus a far ways off from a real recovery. Conversely, on the Trans, the all-time highs of 5548 are much more within reach. The Trans cannot pass its old highs without confirmation from the Dow ... it would be very bearish ... like October 2011 bearish ... and if it kept happening along these lines, then it would become 2008/2009 bearish.
Here's hoping for scenario 1!
