Goodbye divergence, Dow Industrials runs after Transport Index
Transport leads, Industrials follows
Financial engineering and money printing can levitate stocks for some time but not forever. Dow Jones Transportation Average proves once again that it is a leading indicator and canary in the coal mine for Dow Jones Industrial Average.
This chart shows that:
- Strong positive correlation between DJI and DJT is still an effective leading indicator to identify and ‘confirm’ trend,
- Divergences in time-proven correlations can last a long time but cannot continue indefinitely,
- Relationships between indices/pairs like this should be part of every trader’s toolbox.
Back story here. On hindsight, those 6 weeks are absolutely turning points in the DJIA.
Is the Dow bullish after that 400 point rally on Friday 04 Dec? I don’t know but I do know that nothing changed since 5 weeks going on to 6th and the Dow is still resisted.