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Thursday, January 17, 2013

Dow Transports

I have heard a lot of chatter lately about how the Transports are signaling a pickup in the economy and is bullish for the broad market.  You know by now that I prefer to look at charts and make up my own mind, LOL.  Lets take a look at the monthly Transports chart.

Since the late 90s, the transports have made two major tops outlined in the boxes.  Both tops had a rather sharp pullback and fast move back to make a new high.  The final high in 2008 was in May well after the last recession had already started.  Even though the transports are now at an all time high, the chart pattern is very similar to prior tops.  Is this really an all clear on the economy and the markets?  Is it possible it might just be another top?  It is probably going to take a few more weeks before we know which case it is.  However, I think it is safe to say that the current move up is not necessarily an all clear sign.  If the Dow, SPX, and COMPX can make it above their highs from last year it would be a big positive.  Until everything gets in gear though, there remains the possibility this is a top forming.


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