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.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
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"I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."