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:

  1. Strong positive correlation between DJI and DJT is still an effective leading indicator to identify and ‘confirm’ trend,
  2. Divergences in time-proven correlations can last a long time but cannot continue indefinitely,
  3. Relationships between indices/pairs like this should be part of every trader’s toolbox.
DJI catches up with DJT in this overlay

DJI catches up with DJT in this overlay |


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.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "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."
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