transports – Andrew Thrasher

Yes The Market Was Negative Yesterday But Don’t Pee Your Pants

Posted on February 21, 2013 by Andrew Thrasher, CMT

It’s amazing the shifts that take place on days where the market moves like it did yesterday. Those that were calling a top a few weeks ago and then went silent were resurrected with their chest pounding announcements for the Dow to drop to zero….view this as entertainment and not as analysis. They are CNBC and other news sites to draw viewers not to personally make you money. While some technical damage was done yesterday it needs to be kept in context of the bigger picture. I stand by my believe that the risk lies to the downside but we still must be smart.

I’ve discussed the sentiment data that showcased the extreme amount of bullishness that has plagued the market (here here here and here). Typically we see sentiment top out before equities do, and so it seems we can check that box. With each post warning caution I would end it with saying we must watch price and let it dictate our actions. This has been critical since we’ve marched higher in the face of the sentiment warning flags.

Tops are a process. We appear to be seeing further weakness this morning which is exactly what equity bears want to see – but not for the reasons you may think. The market ‘needs’ to go down for those that are on the sideline waiting to “buy the dip” to get excited. This gives the last group of buyers an opportunity to get long and we could very well see this happen a few times. What I’m looking for are signs of market internals cracking with each attempt to recover from the weakness.

You cannot manhandle Mr. Market. He’ll beat you every time. We saw yesterday a near 20% move in the $VIX. This took it to an overbought level on various measurements, this doesn’t mean it must drop but it could signal a breather is necessary. If you’ve been doing the potty dance waiting for stocks to dive don’t get too excited yet. Watch the market leaders, keep an eye on transports, financials, and cyclicals. When these begin to crack, and not before, is when traders will likely begin to get worried.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.

Transports Hit Support

Posted on November 19, 2012 by Andrew Thrasher, CMT

The Dow Jones Transportation Average has been trading in a channel with well-defined resistance and support levels for nearly six months now. I last mentioned the channel when the Index hit resistance at 5200 in late-October. With the strength in the futures market this morning it appears Transports will likely respect its lower trend line.

I’m not overly surprised we are seeing some strength in equities this morning, an oversold rally has been forecasted by what appears like every trader and money manager I follow. The fact that so many have been looking for a bounce here, it just seems like that’s too much short-term bullish sentiment for whatever rally we do get to be sustainable.

Transports Respect Resistance and Stay In Their Channel

Posted on October 22, 2012 by Andrew Thrasher, CMT

Last week’s price action wasn’t too much of a surprise, expecting some type of short-term rally in equities but not guessing for it to have much weight behind it and looking at the slope of the S&P 500 on Thursday giving us a bearish outlook. We closed out the week with some weakness on Friday but ended up just slightly positive.

I tweeted out a chart of Transports on Friday morning, wondering if the index would respect resistance or if we would see some type of breakout. As you can see below we still have a nice and neat channel in the Dow Jones Transportation Average, with a slightly downward bias of the channel lines.

Much has been discussed about the disconnect that’s occurred between the DJ Transports and DJ Industrial averages over the past several months, with transports not confirming recent advances we’ve seen in the major industrial index. A breakout of this channel would likely instill some confidence back into equity enthusiasts that a rally is actually possible. But until then, confidence is getting hard to come by for the bulls.

Things That Make You Go Hmmmm

Posted on August 8, 2012 by Andrew Thrasher

I’ve got a lot on my plate and on my mind this morning but I wanted to put up these charts and give an idea of what I’m looking at since I didn’t post anything yesterday.

It’s times like these where having an investment plan is extremely important, emotion can destroy an investment account and keep you up at night. This current market environment has been making me go back and forward in developing an opinion. On one hand the charts just look ugly but on the other I must respect what the price action is telling me and not try to fight Mr. Market.

First up is a chart of the S&P 500 with the %B indicator which shows us where price is relative to its upper and lower Bollinger Bands. I’m using here the 65-day Moving Average with the bands set at 2.5 standard deviations above and below the MA. As you can see from the two dotted lines, when the %B gets to 0.94, we’ve seen some weakness in the market since 2010. We are currently at 0.93, but this is not an exact science as you know.

Next up is the buying and selling pressure of the S&P 500 which I’ve looked at a few times (like here for example). The green line represents buying volume, which has been falling while the S&P has made higher highs.

Next we have the Dow Industrial Average and the Dow Transports. Typically these two move together, but currently transports have broken away from the Dow in creating new highs. This is something Dow Theorist look at for buy and sell signals, but I won’t get into all that criteria today.

I thought I’d end on a positive note, I had been noticing that the cyclical index had been diverging from the S&P 500, but recently it has popped up, confirming the price action and cancelling out the divergence. Small caps (not shown) also had a positive day yesterday, breaking above IWM’s falling trendline.

Technical analysis is not an exact science. The participants in the market are always changing and the technology is always evolving. There will never be a single chart that acts as the holy grail. I’m worried about equities at this point but like I said, we must respect the price action in front of us.