Dow Jones Transportation Index (TRAN) – Daily Chart (2003 – present)



After a marvelous three plus year run, the Dow Jones Transportation Index (TRAN) recently formed significant resistance in the form of a double top (black arrows & red line) at the 5,000 level. After holding support along its long term uptrend (green line) on five different occasions (noted by the blue numbers 1 thru 5) the transports bounced back towards 5,000 and appear this time to be failing just under the 5,000 level (brown circle and arrows).

The validity of a trend line depends on the more times it is tested and five times makes this trend line very valid.

With the Index rolling over here and possibly heading back for a retest of that up trend line we would watch the trading activity very carefully over the next few days/weeks. Early evidence suggests the highs for some time may be in place near the 5,000 level however, a trend line break would be needed for definitive confirmation. Ironically on a day where GDP numbers came in higher than expected, which should be perceived as good for the economy, therefore good for transportation stocks, the index moved lower not higher. When the transports fail to rally on seemingly good news we have to wonder, are the good and services now being shipped excess inventories ? Or are investors not rallying the transports because the assume inventories are building ? Either way it appears the transports by its lukewarm price action are pricing in a slowdown.

Within the sector, the rails and truckers appear to be in the worst technical shape.


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Technical Rankings for DOW JONES Transportation Index (TRAN)


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Continue reading "Recession: The Stage Is Set"

Recession: The Stage Is Set
Interview With Richard Arvedlund, Founder, Cypress Capital Management
Barron’s, Monday, November 13, 2006

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