Several years back, in the aftermath of the conviction and subsequent death sentence of Scott Peterson (the pretty boy sociopath who killed his pregnant wife and dumped her remains in the San Francisco Bay), I remember seeing a brief interview with one of the jurors in the case who had sealed Peterson’s fate. Around that time, there were countless theories about exactly how and why Peterson had committed the callous acts. There were also plenty who were, and still are, convinced of Peterson’s innocence, insisting that he had been framed by the Modesto, California police department in order to conveniently solve a case that had garnered national attention. And yet, in the face of all of these convoluted theories, standing defiantly in his driveway wearing a U.S Marine Corps baseball cap was Juror Number #4 Mike Belmessieri, who matter-of-factly stated, “(Peterson) was innocent…and then proven guilty. It’s just that simple.”
The Dow Jones Transportation Average continues to represent a key collection of companies, even to those who are not ardent followers of Dow Theory. Over the past few months, the trannies actually went ahead and breached the highs from the previous bull market, despite the fact that the S&P 500 is still several hundred points below its 1576 high hit back in October of 2007. Since the trannies made that all-time high earlier this month, they have been swinging around along with the rest of the market.
To be sure, they have covered a lot of ground in a relatively short amount of time since March of 2009. Looking at a monthly chart of the trannies, it is easy to expect the steep trend to give way. However, there really is nothing about the chart that compels me to look for a major top. While we have plenty of convoluted theories floating around as to why we are either rapidly headed towards a hyperinflationary armageddon or a deflationary repeat of 2008, or worse, a simple trendline dating back to the 2009 bear market lows remains intact. Besides, the overall trend is firmly higher, which means that the bulls are clearly innocent until proven guilty.
And it’s just that simple.
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Tip of my Hat to you for your hard work and excellence!
Thank you.
Chess, I’m a first time post here. Fairly new to the IBC site. I’ve come to notice some common themes with your posts. You put forth a thought/opinion/theory/hypothesis along with some background to it. You always use at least one chart (often more) to point to an example of what led you to those opinions, followed up by an explanation of said chart, tying it all back to why you think what you think. I appreciate the education, enjoy the information and have learned from the lesson. Thanks for sharing your work kind sir, keep up the good work!
Thanks.
I use StockCharts.com to chart with. I can not reproduce your trendline Chess. I can’t do it with the IYT either. http://stockcharts.com/h-sc/ui?s=$TRAN&p=M&b=5&g=0&id=p46231264854&a=240577338&listNum=5
Use a monthly chart.
I am using a monthly chart. That link is to a monthly chart.
It comes up as a daily when I click it.
Really? It goes to monthly when I click on it. Strange. Here is one in another file. http://stockcharts.com/h-sc/ui?s=$TRAN&p=M&b=5&g=0&id=p23095447600&listNum=1&a=240577556
The gods are messing with me. LOL
It came up as daily when I clicked on it as well. Matter of fact when I tried to change it to monthly the only options available were daily and weekly.
Did you try to un-check the log scale?
You are right. I missed that. The line matches. Stupid mistake on my part.
Thanks for the help everyone.
Good stuff
I really enjoy your posts , especially in these troubling times .
Keep up the good work !
Hugh / @CoonCatt
Huzzah.
Deceased crab?
Yeah, the chances are that the overall uptrend will continue but what difference it makes for the bulls right now – when they get killed again and again – I learned this the hard way
I never said it was easy.
It will get interesting when/if that trend breaks. Its do or die next week, when the range on all the indices break up or down we are going to be in for a massive sustained move imho.
I agree stocks are still innocent until proven guilty here, but I’m not willing to bet on their verdict just yet. Show me a bounce off that trendline early next week and I’ll be back in a big way though.
Wouldn’t that be considered a classic Dow theory non-confirmation and thus extremely bearish? The longer we go without bullish confirmation by the Industrials the worse the picture looks no?
I echo the other sentiments posted here- great observation and thanks for the excellent posts.
No. If the S&P had made all-time highs but not the trannies, then that would have been a bearish divergence. If anything, it is extremely bullish that trannies are way out ahead of the broad market relative to conquering 2007 highs.
If anything, it is extremely bullish that trannies are way out ahead of the broad market
I remember you said this was one of your key tells last summer when the same thing was playing out. Worked great then, let’s see if it plays out the same way again.
Hi Chess – is the idea of a non-confirmation open to interpretation? I only ask since I was formerly a Richard Russell subscriber, and during the current bull run, he would often point to divergence between the Trannies and Industrials as a “flagrant non-confirmation.”. And while i dont have his letters in front of me, I am pretty sure he used those words even when the Transports were leading the way.
At any rate, it’ll be interesting to see how this all unfolds. A little more QE and i’m sure the industrials will be joining their transport friends.
After yesterday and today, still same opinion? Unsure? Adopted the opposing view?
I am not so learned in these matters. I would like to know what event would need to take place for you to then change your sentiment and the above thesis?
Thanks for your help.