I thought I'd break the syndicated stories and give a little update on the Dow/Transportation Relationship, which is behaving exactly as I would expect this week.
First, here's the visual:
So, the Dow has melted up from last week's lows to just above the 60% retrace level, and is now falling toward the the 50% retrace level. For anyone curious on what retrace is all about, check out fib numbers at stock charts. The basic idea is that stocks behave in predictable patterns, and tend to both fall and rise to significant support and resistance levels which correspond roughly (and many times exactly) to certain percentages within a range.
Another diagram:
Measuring from the peak at the beginning of April to the absolute trough on April 10th, you can see that the Dow bounced up 50% from the April 10th low. Then it fell slightly before powering up past 61.8% level, and is now falling back toward the 50% level again. Typically, what will happen is the security will hit the 50% level, and then begin moving upward again past the 100% retrace level. This is the most likely scenario that I see happening this week, unless there is bad news from Europe.
Given that both the Dow and the Transpiration Average are still in non-confirming Territory (meaning, they have not confirmed lows, and are still not confirming highs), I expect that the overall trend should remain up, at least for the short term. For the intermediate term, we have to wait to see if BOTH averages surge to new highs. If only one of the averages hits a new high, you can be sure that a sharp move down will be just around the corner.
In the long term, we are still in precipitous waters as far as the Dow/Transportation averages are concerned. Remember that back in July 2011, the Transportation Average hit a new all time high that the Dow Failed to confirm. Now the Dow is hitting new intermediate highs (not all-time) but the transportation average is failing to confirm those moves. Don't be surprised if there is a sharp move down in the next couple of months. If you have the means, consider buying some insurance in the form of an inverse market ETF. Something like 5% to 10% of your portfolio in a fund like this is said to smooth out your portfolio's volatility quite well.
This is not a solicitation to buy or sell any stock or security, and should not be considered professional investment advice.
First, here's the visual:
So, the Dow has melted up from last week's lows to just above the 60% retrace level, and is now falling toward the the 50% retrace level. For anyone curious on what retrace is all about, check out fib numbers at stock charts. The basic idea is that stocks behave in predictable patterns, and tend to both fall and rise to significant support and resistance levels which correspond roughly (and many times exactly) to certain percentages within a range.
Another diagram:
Measuring from the peak at the beginning of April to the absolute trough on April 10th, you can see that the Dow bounced up 50% from the April 10th low. Then it fell slightly before powering up past 61.8% level, and is now falling back toward the 50% level again. Typically, what will happen is the security will hit the 50% level, and then begin moving upward again past the 100% retrace level. This is the most likely scenario that I see happening this week, unless there is bad news from Europe.
Given that both the Dow and the Transpiration Average are still in non-confirming Territory (meaning, they have not confirmed lows, and are still not confirming highs), I expect that the overall trend should remain up, at least for the short term. For the intermediate term, we have to wait to see if BOTH averages surge to new highs. If only one of the averages hits a new high, you can be sure that a sharp move down will be just around the corner.
In the long term, we are still in precipitous waters as far as the Dow/Transportation averages are concerned. Remember that back in July 2011, the Transportation Average hit a new all time high that the Dow Failed to confirm. Now the Dow is hitting new intermediate highs (not all-time) but the transportation average is failing to confirm those moves. Don't be surprised if there is a sharp move down in the next couple of months. If you have the means, consider buying some insurance in the form of an inverse market ETF. Something like 5% to 10% of your portfolio in a fund like this is said to smooth out your portfolio's volatility quite well.
This is not a solicitation to buy or sell any stock or security, and should not be considered professional investment advice.
